Comment It’s worse than you think – we never had austerity
AUSTERITY has become a dirty word. Jeremy Corbyn’s Labour Party says austerity must end. Some Conservative MPs think Labour’s surprise success in June’s general election shows that voters agree.
But there’s one problem for politicians contemplating a new approach... we’ve never had austerity in this country.
Some services, such as policing and local government, have been forced to cope with huge cuts in their budgets.
And millions of public sector workers have suffered major pay cuts, in real terms.
So the idea that we haven’t experienced austerity may sound like a joke to them.
But if austerity means that overall spending on services has fallen, then it hasn’t happened here.
What’s happened instead might actually be worse, because it’s much harder to deal with.
Public services such as schools and the NHS – far and away the biggest single item of expenditure, other than the welfare bill – have seen their funding rise in real terms.
But while enjoying a funding increase, they find it harder to make ends meet.
And this means that you can’t end the cash shortage in schools and hospitals simply by saying you’ll stop making cuts, or even by promising to reverse the cuts already made – because they haven’t had cuts.
Instead, they may need a massive cash increase, on top of the increases they’ve already got.
Treasury figures show that spending has increased. Expenditure was £584.2 billion in 2011-12 but rose to £646.5 billion in 2016-17.
What happens when you take inflation into account? The Treasury does this by adjusting the numbers for every year to 2015-16 price levels,
And it finds that funding increased from £616.2 billion in 2011-12 (at 2015-16 price prices) to £636.5 billion in 2016-17.
A small part of that increase is down to a rise in the welfare bill (all the figures from this point on are adjusted to remove the effect of inflation).
The budget of the Department for Work and Pensions, which administers welfare, rose from £175.9 billion in 2011-12 to £177.2 billion in 2016-17.
So it went up. But there was a bigger increase in the health budget, from £125.5 billion to £140.1 billion.
Education spending rose slightly from £65.4 billion to £67.8 billion.
Of course, some services have been targeted for cuts. The budget for the Home Office, which includes policing, has fallen.
But even in 2011-12, the Home Office budget was just £14.3 billion, much lower than health or education spending.
It doesn’t mean the cuts don’t matter, and it arguably suggests they were pointless because they couldn’t possibly make a big difference to overall spending. But it explains why total government spending has increased even though services such as policing have suffered huge cuts.
If funding for many services has risen then what’s the problem?
The National Audit Office, the official independent spending watchdog, published a report in November 2016 which confirmed NHS funding had risen – but warned that the amount actually spent by health trusts such as hospitals had risen by even more.
This is why NHS Trusts, including semi-independent Foundation Trusts, went £2.45 billion in the 2015-16 financial year.
Demands on the NHS are growing faster than the budget is rising. We live longer than we used to, and old people need more healthcare. The population is increasing. And medical technology gets better – so the NHS now treats conditions which it couldn’t in the past.
And it’s a similar situation in our schools. Another National Audit Office report, in February 2017, warned schools would need to cut spending by £3 billion to balance the books.
But it’s not because their funding
If austerity means that overall spending on services has fallen, then it hasn’t happened here
has been cut. It’s partly because the number of pupils in schools is increasing and partly because they face a series of cost increases that they just can’t control.
These include an increase in National Insurance contributions, increases in the cost of the teachers’ pension scheme and the need to increase pay for some staff because of the Government’s National Living Wage policy, which increases the minimum wage for many low-paid staff.
Even with funding increases, our health and education services can’t cope.
This doesn’t mean we should give up on a solution. It means the answers are more difficult than “ending austerity”.
And it may mean politicians of all stripes have to be more honest with voters about the need either to accept a lower standard of services or to pay significantly more tax.
> Jeremy Corbyn at an anti-austerity march on Parliament last week