The ultimate, hidden truth of the world, is that it is something that we make, and could just as easily make differently.”
David Graeber
After two weeks of party conferences, it is clear that we are on the train to the end of the line, and the buffers are in sight, as the Chancellor committed to yet more fiscal discipline in one way or another. The Conservatives’ levelling up, addressing rising poverty and inequality, and the coming tsunami of climate change, all seem to have been put on the back burner to accommodate the false narrative of fiscal responsibility which marked Sunak’s conference speech.
He said:
So, we need to fix our public finances. Strong public finances don’t happen by accident. They are a deliberate choice. They are a legacy for future generations, and they safeguard against future threats.
I’m grateful, we should all be grateful, to my predecessors and their 10 years of sound conservative management of our economy. I believe in fiscal responsibility, and everyone in this hall does too.
And whilst I know tax rises are unpopular, some will even see them unconservative, I’ll tell you what is unconservative, unfunded pledges, reckless borrowing and soaring debt, and anyone who tells you that you can borrow more today, and tomorrow will simply sort itself out, just doesn’t care about the future.
So yes, I want tax cuts, but in order to do that our public finances must be put back on a sustainable footing.
In those few words, you have the stark reality of what is to come. Despite the Prime Minister’s usual blustering rhetoric at the close of the Conference, which was not enthusiastically received by many outside the conference hall, he seemed to dismiss the current situation as a temporary blip on the way to better times, Rishi Sunak, on the other hand, promised tax cuts, but we’d have to wait until the public finances were on a ‘sustainable footing’.
Johnson’s better times, in that case, will mean instead that we can expect more austerity and cuts to public sector spending. Indeed, senior ministers have said that the levelling up project will likely take 10 years to complete, and they have admitted that there will be pain for voters on the way. We will see, as a result, a further rise in poverty and inequality, more suffering for those who are already having to choose between heating and eating, or worrying whether they will have a roof over their head. Levelling up and fiscal retrenchment are, in fact, mutually exclusive propositions. The incumbents of No. 10 and No. 11 are clearly not on the same page.
And worse, there was scarcely, if at all, any reference to climate change, apart from the green homes grant for which he had already cut funding. Indeed, it has been reported that the Treasury has been blocking green policies on infrastructure and home insulation.
Does this suggest, as it might well do, that the Chancellor has reservations about its affordability? In that case, so much for the Prime Minister’s rhetoric, a week or so ago, which claimed that the climate summit of world leaders in November will be the ‘turning point for humanity.’ Though, obviously, not until we’ve got the public finances under control, and the water is lapping around our feet.
The Chancellor, in his speech, referring in glowing terms to his predecessors’ fiscal credibility, has chosen to ignore the real consequences of their policies and spending decisions on the economy, and the public and social infrastructure. He has chosen to ignore the ongoing disintegration of society as poverty, food banks and homelessness have become an accepted public norm, and the responsibility of numerous, underfunded charities relying on public donations to fund their activities.
Yet again, and predictably, he is falling back on the false narratives of how the government spends and appealing to the household budget-conscious nation to accept that there is no alternative to yet more pain. Hurrah, folks, let’s celebrate! We balanced the budget but killed a lot of people along the way, and failed to secure a green, sustainable future for our children and theirs.
Sunak stated that strong finances don’t happen by accident. From his fiscal discipline bunker, he has twisted reality to suit his rhetoric. The reality is that it is not strong finances but strong economies that don’t happen by accident. They are a deliberate choice by the government and relate both to policy and spending decisions of governments of whichever political persuasion. Over the last decade, this government has consistently glossed over those consequences with political spin and deceit, by always falling back on its fiscal discipline and austerity narrative, claiming that we cannot leave it to future generations to clear up the mess.
Ironically, that same government then spent 18 months propping up an economy that had never really recovered, as a result of his predecessors’ public sector austerity, imposed in the wake of the global financial crisis, leaving a decaying public infrastructure denied adequate funding, and struggling to cope with the pandemic and its associated aftermath.
In the same way, Sunak’s claim that strong finances are a legacy for the future is yet again indulging in a false narrative of how the government spends. Today’s deficits will not lead to a burden of higher taxes on future generations. Suggesting that cutting spending now will enable future spending, in a world of supposed monetary scarcity, is yet more illusion created to keep people fearful and in their place.
The awful reality is that such austerity, as we have already experienced, will continue to lead to an impoverished future for our children and their children, or maybe not a decent future at all if the government fails to act to address the climate crisis.
As Professor Bill Mitchell noted in a blog post in 2014:
“The idea that borrowing ‘takes money from the pockets of future taxpayers’ is nonsensical. The funds to pay for the bonds originate in the government net spending in the first place.
Clearly, deficits now are in part helping the current generation with income transfers and the like. But they also facilitate public education, public health and other infrastructure which provide massive benefits into the future for the current generation and their children.
Once you understand that, then the idea that there is a future burden will make you laugh.”
While the chancellor continues to bang on about fiscal responsibility, and the media hammers out the narrative, these illusions and their repetition keep its audience captured and compliant with Thatcher’s mantra of ‘There is no alternative.’ Frankly, it is no exaggeration to suggest that that mantra is killing us.
Indeed, wherever you look the right-wing media remains a key advocate of government’s unswerving devotion to market solutions and fiscal prudence, harmful as it will be in the current economic uncertainty. Repeat after us, they opine ad nauseam…there is no alternative to sound finance and balanced budgets; hammering it into the public consciousness to reinforce the narrative and drive compliance.
This week, the Telegraph began an article quoting Wilkins Micawber in Charles Dickens novel, David Copperfield, “Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Comparing Micawber’s income and expenditure with that of the State is yet another example of dishonest reporting supporting the political ideology which prevails. The government’s finances bear no resemblance to Micawber’s, or indeed our own. This is because the government is the currency issuer, and the private sector, including individuals, businesses, and public institutions like local government, are currency users. The former has the power of the public purse to spend, constrained only by the productive capacity of the nation, and the latter, the currency user, is compelled to live within its income. They are not the same by any stretch of the imagination.
Let’s not beat about the bush, at this stage in the game when the stakes are high and involve survival. The currency-issuing capacity of government, not just over the last year, but during the Global Financial Crash in 2008 which bailed out the banks, is clear to see, and it is shameful but predictable that the media still continues to toe the political line with such macroeconomic nonsense. That nonsense will, in the end, prove very harmful to an economy which is far from recovering, and which, as a result, will create further economic uncertainty across the board, and most particularly, for those least able to manage.
The article (requires registration to read) is littered, as most are, with macroeconomic untruths about borrowing and debt, or building up a war chest for the future. Sunak has apparently to “cut his coat to an increasingly threadbare cloth’, must put ‘the public finances on a sustainable footing’, and work within the ‘fiscal straitjacket the OBR sets for him.
It gets worse. Against that misrepresentation of how the government spends, the article compared levels of national debt which stood at around 30% of GDP in 2006, [stands today at 98%,] and predictions estimate that in two years’ time it will peak at around 110%. Never mind that it stood at 248% in the post-war period, when the government invested in the nation’s public and social infrastructure, with not a whiff of bankruptcy in sight. Such information serves yet again to shock the public and create those perfect conditions for compliance.
The article then goes on to suggest that it would be ‘perilously close to a level, markets might reasonably think ‘unsustainable’, leaving virtually nothing in the tank to deal with future shocks, or the upward pressures on debt servicing costs that would result from rising interest rates.’
Never mind that the reality is that bond markets don’t control anything, and that it is the government that makes the rules and calls the tune. Never mind that borrowing is just an illusion, a matter of smoke and mirrors, which keeps yet again the public in tune with the messages of soaring debt, paying it down and living within one’s financial means.
As a result of this thinking, Sunak has already broken three of the Party’s manifesto commitments; the state pension triple lock pledge, a promise not to increase the rate of national insurance and breaking its commitment to spend 0.7% of gross national product on overseas aid. And with the ending of the furlough scheme last week and the £20 a week cut to Universal Credit, it is a clear indication of where we are headed.
The choice it seems is a high welfare state or a low tax economy, but we can’t have both. Under this false ‘tax pays for spending’ paradigm, fiscal discipline and balanced budgets are a moral obligation, never mind who it hurts or who dies as a result.
But let’s be clear, these fiscal measurements of an economy’s health are the wrong ones, as GIMMS has noted many times. The size of the deficit in itself tells us nothing about how well, or not, an economy is doing.
What tells us the real story is looking at the economic conditions of the time, both global and domestic, and how the government of the day responded. It points to the economic ideology that prevails when the government cuts or increases spending. It shows who benefited and who lost out.
Over decades, under successive governments, it has been working people who have lost out to this toxic ideology of market supremacy, which has created vast disparities in wealth, and placed downward pressure on standards of living, as ever-greater shares of productivity were distributed to fewer people.
The truth is that the ‘misery’ referred to in Micawber’s quote is not related, in this instance, to a government that has been fiscally imprudent, but the misery that will be caused by a government that has failed to provide the infrastructure a modern economy needs to function, and a fairer distribution of real wealth and resources, not to mention the prospect of a sustainable future. An economy which is, after all, the people that contribute to it, who have borne the cruel brunt of government policy and spending decisions.
That is what we should be focusing on. Not whether the government or the chancellor of the day is fiscally credible, or whether he has achieved his objectives of keeping public finances balanced. On this basis, we can understand that this current government holds its citizens in contempt. And it also holds our children, and their future, in contempt.
Professor Bill Mitchell nailed it simply in a blog this week when he wrote:
“But let’s clear a few things up first.
1.
The government’s fiscal balance is not a motor car. The latter sometimes required repair when a component ages and falters.
There is no sense to be made of applying the metaphor to a fiscal balance.
One doesn’t ‘fix’ that balance.
One doesn’t ‘repair’ it.
It is what it is and should never be a target in itself for action.
In a modern monetary economy, the currency-issuing government should be targeting things that matter – like protecting “peoples’ livelihoods” and letting the fiscal balance be whatever is required to achieve that aim, conditional on what the non-government sector is doing with respect to spending and saving decisions.
Currently, that means the fiscal deficit has to be continuously large in Britain.
Not forever, but any notion of a fiscal surplus or balance is nonsensical, and the pragmatist would soon see the unemployed bodies piling up and be forced to do something about it.
2.
The future generations choose whatever public debt levels and tax structures that they will live with. The baby boomers didn’t impose any particular tax structure on our children.
Once they get to voting age, they can express their preferences accordingly.
What we have left them with is massive deteriorating natural environment, the ‘gig’ economy where their future prospects are damaged, a housing market that will preclude all but the ‘rich’ kids from fully participating, run-down educational institutions, health services that are underfunded, public transport systems that continually fail, and all the rest of it.
That is the burden that this “we need to fix our public finances” mentality has wrought for our children, and for us, and for the planet.”
In conclusion to this week’s blog, it is becoming very clear where this ‘Brave New World’ promised by Johnson, at some as yet unspecified time in the future, is going to lead us. Most certainly not to a land of post-Brexit milk and honey. When a Prime Minister tells his audience that we should look at ‘the most important metric […] wage growth’, and ‘never mind life expectancy’ or cancer outcomes’, horrific as that statement is, the higher wage growth story is embellished, and doesn’t tell the whole story about the uneven nature of that wage growth and who is benefiting and why. It is time to question and challenge what those words may signal for the future.
Apart from being a crass and cruel statement that belittles people’s lives as inconsequential and disrespects those affected by such issues, it can be directly correlated to 10 years of cuts to public spending, leaving people vulnerable and our infrastructure decaying. By saying this, he is wilfully ignoring the impact of previous government choices on the nation. But admitting it, even if he thought it, would spoil the narrative he is desperate to convey of good times ahead.
At the same time, he is suggesting in his best free marketeer mode that the markets will sort it all out, if the government just steps back and allows them to do their work. At the same time, and ironically, he has also blamed businesses for not having done so.
The hands-off approach is not working, as has been demonstrated many times. This week, the army was brought in to get fuel to service stations as driver shortages continue to put pressure on supply lines. Let’s not forget either, a government that outsourced its responsibilities for the provision of PPE last year, and failed to plan for the pandemic, both with disastrous results. Or what happens to the quality of services and people’s wages and job security when public services are delivered by a greedy, profit-driven private sector. All are a clear indication of the government priority not to govern, but to shift its obligations downwards and wash its hands of any responsibility.
If Sunak gets his way and continues down the track of fiscal discipline, as Johnson exalts, as he did in an interview this week the power of the market to deliver economic miracles, then the future that is being mapped is one of total negation of the government’s role in the economy. Just as they have always wanted it. Welcome to a return to pre-second world war conditions that most of us won’t recognise or remember.
This was further emphasised by Sajid Javid suggesting in his speech to Conference that health and social care, ‘begins at home’, and ‘people should rely on their families in the first instance rather than on the state.’
When Javid talked then about his role volunteering in a care home, we can begin to envision the sort of society he is talking about. The Big Society, where charities and individuals take the place of government, which then provides the minimum in public service provision.
Frances Ryan in the Guardian was clear:
“Javid’s comments are not simply offensive – they are a worrying sign about the future of social care. It is worth reflecting on what Javid’s speech means: the health secretary believes that government should not take overall responsibility for health and social care. That is not a minor thing. It is a radical rewrite of the social contract, and an abandonment of basic ministerial duty.
Last month, Boris Johnson’s social care plan gave minimal extra funding to the sector, and no word on how to meet unmet care needs. Javid appears to see himself as building a repackaged “big society”, where the market and individuals rule supreme, the state collects rising taxes but delivers little more for it, and disabled and older people will be cared for as long as they do not expect the state to do it.
It isn’t “fixing” social care for the government to tell families to do the care themselves. It is passing the buck. Why bother solving staffing shortages or unmet care needs when you can just shift the burden on to the public?”
To then go on to suggest, as he did, that we currently live in a ‘compassionate, developed country that can afford to help with that’ [caring] is to deny the last 10 years of government policies and spending decisions which have pulled the carpet from under the feet of many families, leaving them to struggle to cope on their own or rely on what charity is left to help.
Those same charities are now struggling to keep afloat as a result of cuts to public spending, which have filtered down to our local communities where much of this vital work was being done. Work, which, in many cases, is mitigating for government ‘failure’ and abdication of responsibility.
So, the narrative is being constructed that we can all be volunteers or carers and work for free, to reduce the financial burden on the State.
The culture of individual responsibility, not a bad thing in itself, has been cultivated by successive governments espousing neoliberal ideology, and is being used to justify further disintegration of our public services. A do-it-yourself programme. It fails to recognise the social determinants of health, which, in turn, rely on a government whose policies and spending creates the infrastructure that allows a positive culture of independence and responsibility to thrive.
Whether it was pandemic or healthcare planning or ensuring that we had sufficient HGV drivers or social care workers, as GIMMS has pointed out before, it was the government’s responsibility to think strategically and plan for the future. Instead, it absolved itself from any responsibility, expecting a disparate, profit-led, short-term thinking market to deliver. It hasn’t, and won’t, and yet the government is still pursuing this direction.
While the public continues to accept the notion of the public finances being like their own household budgets, and accepts its fate as necessary, there can be no progress. As even more cuts bite into lives already grappling with the consequences of the last 10 years, more austerity will quite simply mean that we will all be the losers in the end.
However, on a final positive note, armed with the tools that an understanding of monetary reality provides, it doesn’t have to be that way. We can change the world with the political will to do so. It is up to us to keep pushing for that alternative vision.
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