Austerity is over? So has the deficit simply vanished?
EVERY month my bank takes money from my account to cover my mortgage. I’ve often wished it away, thinking how much easier life would be without all the bills. But all I need to do, it seems, is pretend I don’t owe the mortgage company a penny.
It turns out I don’t have to pay off any of my debts. At least not for years and years and years. I can just ignore them. Imagine how much more fun life will be now. If I fancy an extra holiday but can’t afford it, so what? Splash the cash and ignore the bills.
If you think I’m living in fantasy land perhaps you could try pointing that out to the Cabinet. Speaking on Monday night to Tory MPs, Theresa May said that austerity is over. Instead of bringing the deficit under control and implementing plans to reduce the national debt, the Government is going to go on an even bigger spending spree.
To be fair to Mrs May she is responding to the demands of Tory MPs – and she is in no position to dictate anything to anyone.
According to reports over the past few days Tory backbenchers – and Cabinet heavyweights such as Boris Johnson and David Davis – have said in no uncertain terms that they would refuse to vote for the continuation of existing spending plans. They want to see more money spent.
According to these Tory politicians, Mrs May’s plans for cuts misjudged the national mood.
GAVIN BARWELL, Mrs May’s new chief of staff – who lost his Croydon Central seat last Thursday – told the BBC on Monday that austerity had repelled voters.
He said: “There’s a conversation I particularly remember with a teacher who had voted for me in 2010 and 2015 and said, ‘I understand the need for a pay freeze for a few years to deal with the deficit but you’re now asking for that to go on potentially for 10 or 11 years and that’s too much.’ That is something that Jeremy Corbyn was able to tap into.”
We appear as a nation to have entered la-la land, in which everyone pretends it doesn’t matter that we are living beyond our means.
The past seven years, and Mrs May’s manifesto plans, can certainly be criticised – but for being too weak.
If we spend more than we bring in as tax revenue there is a deficit. And the borrowing that is needed to make up that deficit is added to the national debt.
Public sector borrowing now stands at £51.7billion. That means that we are spending £51.7billion that we do not have. The Government is overspending by almost £1billion every week.
The overall debt now stands at almost £1.9 trillion – which is 86 per cent of GDP, more than double what it was before the 2008 crash – and is growing at £5,170 per second.
When George Osborne became chancellor in 2010 he pledged to eliminate the deficit by 2015. With every passing year, however, that target date has been pushed back so that in the Conservative manifesto this time round the promise was to eliminate the deficit by “the middle of the next decade”.
Somewhat hilariously, given their record, the manifesto also said: “Conservatives believe in balancing the books and paying down debts because it is wrong to pass future generations a bill you cannot or will not pay yourself.”
Mrs May and her Chancellor Philip Hammond are now going to push tackling the deficit even further away than the manifesto commitment of 2025. Schools, the NHS and social care will all have even more cash splashed on them.
In other words the Government could soon pass to future generations a bill it cannot pay or will not consider paying now.
It is difficult to imagine a more dangerous response to the Corbyn phenomenon.
Of course voters said they liked Labour’s idea of spending more money on nice things. They always do and they always will. But they respect – and vote for – parties who treat them as grown-ups.
Instead the Conservatives’ response to young people’s support for Labour is to make sure that they and their offspring end up paying for our overspending.
RIGHT now 2015 might seem a generation ago but it was only two years ago that David Cameron won a majority after five years of Ed Miliband campaigning against “austerity”. And Mr Cameron did that by pointing out economic reality.
Now the Tory plan to fight the Corbynite onslaught is to offer to be a little bit Corbynite. It’s like watching your grandpa dressed in sneakers and a baseball cap: it doesn’t convince anyone because it is ridiculous.
Yesterday morning, in a piece of exquisite timing on the very day ministers were shouting from the rafters that austerity is over, inflation jumped to 2.9 per cent.
You can pretend the deficit doesn’t matter but facts have an awkward habit of hitting you smack in the face.
With inflation up, wage demands will increase and if the markets lose confidence in the Government’s economic policy interest rates will rise.
And before you know it we will be back with the toxic mix of that 1970s favourite: a wageprice spiral, spending out of control and high interest rates.
Why do we never learn from history?
‘We appear to have entered la-la land’