“Do we want to be a society that is supportive, that is inclusive and compassionate, where it is acknowledged that not all can prosper, where those who are most vulnerable, most in need of help, are not seen as lazy or scrounging or robbing the rest of us for whatever they can get? Where we do not turn our backs on those facing hard times, we do not abandon them or exploit their weakness, because they are us.
We leave no one behind, we only say we have crossed the finished line when the last of us does, because no one is alone and there is such a thing as society.”
Michael Sheen, speaking at The People’s March for the NHS, Tredegar, Wales
On Wednesday, the Chancellor Rishi Sunak got up to the Dispatch box to deliver his Budget. As usual, the devil is in the detail, which we’ll come onto later, but at any rate, you couldn’t come away without the impression that there will be a future price to pay for the Government’s huge spending bill.
More than once, the Chancellor talked about fiscal responsibility, emphasising the record amount of borrowing, and suggesting that without corrective action ‘it would be the work of many governments, over many decades, to pay it back’. And whilst it would be ‘irresponsible to withdraw support too soon,’ at the same time it would be ‘irresponsible’ to allow our future borrowing and debt to rise unchecked.’ The ‘fiscal freedom to act’ was dependent on healthy public finances the Chancellor opined, and affordability would be the measure by which any future spending decisions will be made.
Trying to sound sincere by attempting a direct appeal he said, ‘I want to be honest with the public,’ then went on to suggest that there was no alternative to beginning ‘the work of fixing our public finances’. In other words, the government’s coffers are running on empty and we need to replenish them and pay down our debts.
If at this point you’ve lost the will to live, then it would be understandable, particularly if you have been a regular reader of the GIMMS MMT Lens. With false narratives about how governments spend, the public is being prepared for those ‘hard choices’ that the Chancellor has already promised. It is however economic illiteracy at its best both in terms of getting the economy back on its feet and importantly monetary realities.
Debt doom-mongering by the Chancellor will likely have the reverse effect to the one intended. For those who have been lucky enough to have saved over the past year, with such uncertainty and the prospect of higher taxes, who is going to be cracking open the champagne or booking their luxury holiday in the Maldives? Maybe a possibility for some as we come out of lockdown, but not a done deal and there is still much uncertainty. And as for those working people who are already on lower incomes, in debt or potentially facing the prospect of losing their jobs in the near future, spending will be the last thing on their minds.
After 10 years of damaging public sector spending cuts, employment insecurity and the rise in poverty and inequality arising from it, which has affected all sections of society (except for the very rich) the expectation of more pain will more likely send people scurrying for safety rather than planning a big spending spree.
Littered throughout the speech were the usual false household budget narratives which have defined Treasury speak for decades: debt and deficit reduction, taxing and borrowing, affordability, debt burdens on future generations, hard choices and fixing the public finances. Weasel words which do not reflect monetary reality.
Whilst the government has indeed used its fiscal firepower, if somewhat selectively, to protect the economy over the last year, its price is couched in that of sound finance, or how we pay for it. It is time to call this narrative out for what it is. Economic twaddle. The real issues are not repairing the finances, as the Chancellor has repeated endlessly and which is parroted by economists, institutions, and journalists alike, but how can we use existing real resources to create a fairer, and more sustainable economy in the aftermath of the pandemic given the huge challenges we face in addressing inequity and climate change.
As a nation, we have choices to make and once again the question can be reduced to asking what sort of society do we want to live in and how can we deliver it? Over a decade, our public infrastructure has been laid waste and the tragic and unnecessary consequences laid bare.
As a result of a toxic economic ideology, the private sector has been promoted as the wealth creator, and vast amounts of public money have seeped into private profit rather than public delivery. And yet, strangely, at the same time, the question of affordability only applies to publicly delivered and managed services. Not to the corporations whose bank accounts have swelled with no transparency or accountability. And nowhere has that been made clearer than in the Chancellor’s Budget.
Aside from the already damaging consequences of government spending choices, which have decimated public services, capped wages and decreased employment security, the question of how we improve the lives of ordinary people remains largely unanswered. Despite the empty words and posturing in Johnson’s and Sunak’s plans to level up society. The pressing question of addressing climate change also remains in the margins of urgency.
On closer inspection, underneath Sunak’s spending promises to keep the economy afloat over the next few months lies a different story. Whilst the Universal Credit uplift has been retained and despite calls for it to be made permanent, the Chancellor has only secured it until September, leaving huge uncertainty in the lives of people already hit by previous changes to social security benefits which have driven increasing poverty, hunger, and homelessness.
Through the Chancellor’s decision to freeze income tax thresholds, ordinary people will be hit with a sneaky income tax rise, whilst the increase in the minimum wage to £8.91 an hour from April is scarcely a giveaway for people already on low wages and struggling to make ends meet. With 700,000 people already in arrears on their rent, over a million in severe debt and a rise in destitution, not to mention the prospect of a council tax rise of 5% to add to the woes, the Chancellor has shown not financial skill or prowess but revealed his lack of macroeconomic credentials.
By concentrating on the false trope of ‘fixing the finances’ he has failed to address the key financial problems being faced by large sections of the population; both as a result of current and also previous spending decisions. Add to that the impact of further job losses with, according to the IPPR, more than half a million employers facing bankruptcy, remembering that one person’s spending is another’s income the future is looking ever more depressing for many.
With no additional funding for public services and a further £4bn of spending cuts to be added to the £11bn already announced, austerity it seems has not gone away. The pay freeze already announced last year in Sunak’s spending review is a kick in the teeth for 2.6 million workers, which includes millions of teachers, police and other workers who have been on the frontline during the pandemic and was described by Sunak as ‘fair and proportionate’ given that private-sector wages had been falling, hours cut or redundancies made. A question of equity? No! Pitting public sector workers yet again against the private sector, reinforces not only the fake message that the public sector is only affordable in a prosperous economy, but also allows working people to be distracted from their common cause – the class struggle. It also distracts from the reality that it is the government that that has the capacity to spend, as the currency issuer, and to set prices through its legislation.
In the light of the proposed 1% pay increase for the NHS, to add injury to insult Nadine Dorries suggested that nurses ‘do their job because they love their job’. The Health Secretary, Matt Hancock, then went on to defend the measly sum on the basis of financial affordability. Aside from the extraordinary dedication of our nurses, doctors and other health workers over the last year, which has been reduced to goodwill by Dorries, as many in the profession have said, ‘you can’t live on claps’. GIMMS echoes the words of Rachel Clarke, a palliative care doctor and author who said:
‘The government insists a proper NHS pay rise is unaffordable… It’s claptrap of course. It is a political choice. […] If the prime minister can afford to spend two-thirds of the entire NHS annual budget on a very fast train, he can also afford to reward NHS staff with a real-terms pay rise. The fact that he has chosen quite deliberately not to do so speaks volumes.’
Indeed, but what was also missed out of the Budget speaks even more volumes. In the week that one of the UK’s largest care home companies announced that it was to sell off dozens of its homes, the Chancellor failed to make a mention of the catastrophic state of social care and has yet again put the problem onto the back burner.
As the sector faces financial problems due to falls in occupancy as a result of COVID-19, and combined with reductions in fees from the councils who fund them, who are cash strapped themselves due to funding cuts, the on-going viability of the current care home infrastructure is at risk.
Although the increase of 5% on council tax will allow 3% to be used for funding social care, this is yet another example of what happens when private companies delivering public sector services can no longer turn a profit. This not only leaves people high and dry worrying about where they might spend their remaining years, it also begs the question as to why private companies are involved at all? Residential care should be funded adequately at central government level and be returned to public provision, locally provided for the interests of all concerned. There has been much discussion on finding solutions to the problem of funding social care which usually boil down to monetary affordability. Deficit spending and rising public debt have become the bogeymen upon which all spending decisions are taken. And in the orthodox model of how money works, someone will have to pay, i.e. in higher taxes.
And yet, the reality of the situation is as Stephanie Kelton noted in her book ‘The Deficit Myth’ published last year:
‘The country’s real deficits are in healthcare, jobs, infrastructure, education and the climate.
It seems that no lessons are being learned from the previous 10 years of public sector cuts, and their effects on the economy and the focus on balancing public accounts rather than the economic well-being of citizens will continue to wreak devastation. In the same breath as announcing that the ‘economic emergency’ caused by Covid-19 had only just begun and would cause lasting damage to growth and jobs, he is talking about how we pay for it. These are mutually exclusive positions.
The greatest omission in the budget was an absence of clearly articulated green measures. This was an opportunity for boldness, but instead, it was a damp squib! Promises of action make for good propaganda but according to research by Vivid Economics much more needs to be done to meet environmental targets and the Chancellor failed to put flesh on the bones.
As work by economists including Joseph Stiglitz has shown, green spending could create jobs and provide economic benefits as countries struggle to lift their economies out of the Covid-19 recession. And yet, whilst the government waves its environmental credentials as a host for COP 26 to take place in the UK in November, at the same time it is sitting on the fence over the opening of a new coal mine in Cumbria. Jobs are an important consideration, but as Fatih Birol from the International Energy Agency told the Guardian countries must forsake coal as a matter of urgency and avoid repeating the mistakes of the 2008 financial crisis.
We need as a matter of urgency to follow a more sustainable path for a green recovery, not stampede for growth at any cost! We cannot return to the false normal that we had before Covid-19 arrived on the scene.
In the light of rising unemployment, particularly amongst young people who have suffered over the course of the last year, a properly targeted green stimulus could tackle it through green initiatives to provide jobs and training focused on renewable energy and environmental conservation. Combined with the implementation of a job guarantee to ensure that no-one is left behind on the unemployment scrap heap, such initiatives could revitalise the economy by putting human and planetary well-being at the top of the agenda. But instead, as the UCL Institute for Innovation and Public Purpose suggested in a recent blog ‘The Treasury is reverting to free-market economic orthodoxy, relying on business and the housing market to do the heavy lifting’.
To conclude, it is an irony that with such huge challenges ahead, that on both the left and the right of the political spectrum Mrs Thatcher’s dictum ‘There is no such thing as public money. There is only taxpayers’ money’ is still alive and thriving.
But as GIMMS Associate Member, Neil Wilson put it in his budget preamble:
“If there is one thing the last year has taught us it is that the Government is never short of money”
But why is it always presented as a hard choice? Balanced public accounts or sustainable human and planetary flourishing? There is an alternative to this narrow and destructive vision of the future. And it is one that if we fail to grasp the message that monetary reality brings, we will betray our children and grandchildren who will pick up the real cost of not acting. It will not be a monetary one. It will be one of planetary destruction and human decline.
In the words of Naomi Klein:
“Because, underneath all of this is the real truth we have been avoiding: climate change isn’t an “issue” to add to the list of things to worry about, next to health care and taxes. It is a civilizational wake-up call. A powerful message—spoken in the language of fires, floods, droughts, and extinctions—telling us that we need an entirely new economic model and a new way of sharing this planet. Telling us that we need to evolve.”
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