‘We hope this pandemic will teach us that in normal times we must build up our supplies, our infrastructure, and our institutions to be able to deal with crises. We should not wait for the next national crisis to live up to our means’.
Yeva Nersisyan and L Randall Wray
Austerity and cuts to public spending have taken a wrecking ball to our public infrastructure, not least local government. As central government funding was cut as a deliberate austerity policy, councils have spent the last 10 years trying to balance their books by cutting services and increasing local taxes and other charges to make ends meet. In 2019 council leaders said that government funding cuts would leave a £25bn black hole – leaving some councils having to consider bankruptcy as an option. The COVID-19 crisis is revealing the scale of the damage which has been done to the vital public infrastructure, particularly that which serves our local communities.
Despite the government’s COVID-19 crisis bailouts amounting to £3.2bn last month and additional money for social care, the writing is on the wall. Windsor and Maidenhead District Council said it was ready to file for bankruptcy as a result of its predicted £14m shortfall with only £6m in reserves. Many other councils face similar dilemmas. What options are left when they have already cut their spending to the bone to keep delivering their statutory duties which include social care? Already, there have been huge cuts to local services.
Hundreds of libraries closed, children’s and adult social services cut, a public health budget which has faced hundreds of millions of pounds in cuts since 2014/15, fewer waste collections, cuts to parks, sports, arts and leisure services not to mention increased outsourcing of public services including social care to private contractors to cut costs. While the focus has been rightly on how rundown the NHS has become as a result of a decade of austerity, council services which have also borne the brunt of cuts have left the UK totally unprepared with insufficient staffing and a degraded infrastructure to cope.
And now the situation has become so dire that even statutory duties are no longer sacred. Last month it was reported that a number of councils had taken advantage of the government’s COVID-19 emergency measures which allow them to suspend their duties to provide elements of adult social care so that resources can be redirected towards coronavirus support.
While government ministers claim, from their ivory towers, that they stand behind councils and that they are giving them the funding they need, the evidence is to the contrary. The horse has already bolted from the stable and did so the day George Osborne imposed austerity on the nation. Ten years of cuts cannot be remedied quickly and easily; you cannot rebuild overnight that infrastructure that has been lost. Without adequate central government funding now, local government will remain a shadow of its former self or indeed may not survive in its current form. With social care budgets making up over half of what councils spend then it is clear that something will have to give. It is likely that the axe will fall not just on remaining services but also on social care; the review of which has yet to take place having been kicked down the road endless times by successive governments.
We are facing the demise of local government and local democracy for more centralised decision making which can only be to the detriment of our local communities who are served best by those that know them best. Local government needs a massive injection of funds to allow it to implement both central and local initiatives, not just to manage this emergency but to ensure that the economy can rebuild itself and flourish in the future. It needs to rebuild the infrastructure that currently sits in tatters as a result of deliberate government policies to dismantle it. All it lacks is real political will.
Some deride local government, but without the services that it provides our lives have become poorer. We are beginning to recognise that, along with our NHS and other public services, they form the bedrock of our local communities. COVID-19 has revealed their vital nature in this time of national emergency. As the spotlight falls on our public infrastructure which has been so cruelly stripped down, it highlights the terrible cost of austerity. Not just in deaths from COVID-19, the scale of which was preventable had the government acted sooner, but also deaths caused by government policies and reforms to the social security system which have dehumanised people, left them impoverished, hungry, homeless and sometimes suicidal.
While we witness the very real consequences of the economic ideologies pursued by successive governments, which have denied the value of our public infrastructure except in profit terms for private corporations serviced with public money, we are now also witnessing another battle. The battle about the affordability of the current round of government spending and the perennial question about where the money will come from to pay for it.
This week, two articles appeared in the Telegraph which is not known for its progressive stance. The first suggested that according to a leaked Treasury document the country could face a ‘sovereign debt crisis’ and it set out a package of tax rises and spending cuts which would be aimed at ‘enhancing credibility and boosting investor confidence.’ It proposed an end to the triple lock on state pension increases and a two-year public sector pay freeze (so much for all that clapping on the steps of No.10). In effect, it suggested that higher debt now will have to be paid for in the future to stabilise the debt-to-GDP ratio and ‘prevent debt from growing on an unsustainable trajectory’.
Then, in the same week, another more surprising article entitled ‘The Treasury is wrong’: we don’t need hair-shirt austerity’ contradicted that proposition and said that ‘it was a sure-fire formula for structural damage and an economic depression.’ It also suggested that ‘we should be cutting taxes to support the economy’ and said that ‘the idea that we need significant spending cuts or tax rises is completely wrong.’ The author ended by commenting that it was ‘extraordinary that a sovereign country with all levers of economic policy under its own control should contemplate such self-harm’’. Whilst it is true that the article is still couched in the orthodox household budget narrative that austerity would lower future tax take and thus would be counterproductive for the public finances, it does nevertheless point out that such a course of action would be tantamount to a ‘scorched earth policy’.
However, confusion seems to reign in Tory-supporting circles as on Friday Boris Johnson, rejecting the Treasury floated proposal for more austerity to cover the cost of the coronavirus crisis, said that there was no question of freezing public sector workers’ pay and that the government were intending to spend heavily on infrastructure as the country exited lockdown. On the other hand, whether one can trust Johnson’s promises is another matter, given his track record on truth-telling both before the crisis and through it. Whilst he has a very short memory it is also possible that it will be a short career as Prime Minister. Clearly, it reveals potential tensions between No 10 and the current occupant of No 11, but it also demonstrates that the standard household budget orthodoxy still takes precedence even if it is purely a mechanism to deliver a political agenda rather than a recognition of how governments really spend.
We should remember whose pockets have benefited these last couple of months from public money. Only this week, it was revealed that the government had awarded £1bn worth of contracts to private companies bypassing the tendering process and thus any accountability. It had also failed to use NHS Laboratory capacity for testing, preferring to give the work to private companies. The lie of the land is easy to see. There is never a shortage of public money for corporations, but when it comes to public services the magic money tree goes into hibernation.
That we are seeing challenges to the economic orthodoxy of the past few decades is a positive step forward. Less positive is that it is still being seen in terms of productive economy meaning more taxes and less debt as if the national debt were the single most harmful issue that the nation faces. The suggestion that the government could face a sovereign debt crisis is the same as David Cameron deceitfully suggested in 2010; that we were like Greece and could go bankrupt if we didn’t get our public finances under control.
However, as many more people are beginning to realise, the UK government as the currency issuer can never run out of money and cannot become insolvent. When it issues bonds, which are portrayed erroneously as borrowing, it can always meet those liabilities upon maturity including any interest accrued. In fact, it doesn’t even have to issue debt to cover its deficit.
The bottom line is that the national debt represents our assets – our savings – not a burden on the nation, either now or for future generations. In 1945, when our debt to GDP ratio was around 240%, we built our NHS and put in place a social security system to protect people from cradle to grave. That spending represented a real investment in the future of the nation and the economy and in doing it we didn’t go bankrupt then, any more than we can now.
It is vital to turn this damaging narrative on its head. Deficits do matter, but not in the way we tend to think they do. They are normal and necessary, representing as they do our savings and the money circulating in the economy. Rather than focusing on the size of the national debt, it would be better to ask questions about what that debt represents. What was it spent on and why and who benefited or lost out? The answers to those questions will vary depending on the economic conditions of the day and the political agenda of the government in power.
The record of any government, which includes a range of factors from social to economic including full employment, is the real measure of success. Not whether it was fiscally disciplined and achieved a balanced budget. Damaging a nation’s health and prosperity cannot in any way be defined as success. The Conservatives spent ten years destroying it and regardless of how much money is promised now or in the future, it will take time to rebuild that lost public infrastructure if indeed they choose to do so.
In these difficult times, we are seeing the consequences of austerity on everything that we have hitherto valued but have maybe taken for granted. We have allowed successive governments to whittle away at those public structures upon which the foundations of a fairer society were built in the post-war period. We have accepted, not just the lie of unaffordability because we understandably compared the state finances to our own household budgets, but also that the market provided better outcomes for publicly paid-for services as if the government could be compared to a profit and loss business. This, in turn, has given corporations huge influence and power in Westminster and has lined their pockets, at the expense of good quality publicly funded and managed provision.
Those lies are now unravelling. Let’s make sure they unravel to a conclusion which invites a re-examination of our values and a commitment to creating a collective vision of the future which is both environmentally sustainable and fairer for all. Failure to challenge the rapid transformation of our society into a corporate free-for-all will leave us impoverished automatons in its service.
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