New era of rising taxes and spending cuts not inevitable
THE gloom. The feeling of impending dread. The resignation. You don’t need an economics degree to get the message about Thursday’s budget. It will be a nightmare, ushering in a nightmarish period of cuts amidst threats of strike action from almost every public service.
Pain seems to be a grim inevitability. The £50 billion hole in the public finances has to be filled. And even though we know the catastrophic Truss-kwarteng budget caused some of it (and no bushwhacker half-hearted apology will redeem them) we are all stuck with it now. Worse – whisper it – there must be some fault on our part. Surely not even the Terrible Two could rack up that much debt in a single day?
And so, the search for scapegoats begins. The EU is still the most popular – despite Brexit. Britain, we’re told, is still being hobbled by Brussels’ regulations, although mysteriously only 7 per cent of them ever received objections from a UK Government. They are determined to push refugees our way – though the UK has only had a fraction of the numbers accepted in France and Germany. And it’s their fault our exporting businesses are now tied up in endless third-country red tape.
This just doesn’t wash. Britain left in a huff, rejecting the option of remaining inside the EU single market but outside its institutions – as the EFTA/EEA countries do – and as a result lost 4% of our GDP, contracts, businesses, talented workers, academic collaboration, goodwill and access to live on a continent leading Brexiteers quietly call home.
That decision produced more predictable economic harm than the catastrophe of Covid. Yet still some people buy the Brussels-bashing, or the Tories’ newest twin scapegoats – war in Ukraine and world conditions. Of course the wider world and all of Europe is suffering. But with 85% of British households dependent on gas and a UK Government that failed to invest in gas storage or decarbonised heating systems, Britain has been hit far worse than its neighbours.
Still though, there’s a conviction that we must be partly to blame for this mess. It’s like a modern version of that terrible inscription – “We are the Wicked Generation” – carved into a window of Croick Church in Sutherland by evicted people huddling outside during the Clearances of 1845. It was not their fault then and it’s not our fault now.
The public is being groomed ahead of Thursday’s Autumn Statement to believe there is no alternative to deep spending cuts and austerity by a combination of cynical Tory shysters, free-market-favouring economists who have scarcely been off our screens thanks to years of Tory turmoil, and BBC presenters either steeped in the orthodoxies of Tory-city thinking or terrified of cross-examining “experts” in a field they find baffling.
I’ll freely admit, that latter group includes myself. But it’s time to feel the fear and ask tough questions anyway, perhaps aided by valuable free-thinkers like Newsnight’s economic editor Ben Chu, who all but demolished the UK Government’s strategy with a neat fourminute package last week. The Institute for Fiscal Studies predict the Government looks set to miss its own fiscal rule – that national debt should be falling as a share of the overall economy by 2025-26 and the “fiscal hole” describes how much taxes must be raised by that year to meet it.
But these are choices, not tablets of stone and, according to Newsnight, Jeremy Hunt is already going to make a different choice this Thursday by making 2027-28 the target year for debt to fall.
But if that fiscal rule is so damaging that a Tory chancellor plans to break it, why not jettison the whole strategy? IMF figures show that projected deficit as a share of GDP in Britain – even now – is far smaller than Japan, the US, Italy and France. And, even though the latter two are breaking EU fiscal rules, they had no plans for crippling austerity measures to fill their own larger fiscal holes, even before the European Commission announced relaxing rules last week.
That’s only sensible.
It doesn’t take a genius to figure out that raising tax and choking off support to the working people who spend and circulate cash is massively counterproductive. Or to know there’s little point in contemplating fiscal action to improve Britain’s low productivity which is exacerbated by seven million citizens awaiting hospital procedures in an underfunded NHS and chronically low levels of private investment – a feature of the British economy since the Industrial Revolution allowed British financiers to pay poverty wages and sink profits elsewhere in the rapidly growing empire. Plus ca change (looking at you Jacob).
Britain’s low-wage economy was only vaguely sustainable because of low interest rates, turning most citizens into mortgage and debt slaves, in hock up to our eyeballs thanks to governments that encouraged home-owning (however precarious) or changed the subject.
Now, as interest rates rise, the wheels have come off a rickety cart long paraded as the only economic game in town. Workers cannot afford the basics, thanks to wages that haven’t really risen in decades and prices shooting up higher and faster in Britain because Margaret Thatcher wilfully abandoned food, energy and price security so that a few fat cats could make millions trading other country’s products instead and trickle down would sprinkle a few bawbees to the rest. It hasn’t worked.
Other G7 economies have far bigger black holes they intend to live with rather than fill immediately via spending cuts. The UK is only in a different situation because the Truss-kwarteng Big Mistake has created a perceived need to regain market confidence by acting tough.
But that’s a political decision. It’s probably won’t be wholeheartedly challenged by Sir Keir Starmer, a man terrified of any association with “that socialist” Jeremy Corbyn. But, whether voiced inside or only outside the hallowed chamber, there is an alternative. And whilst most English voters refuse to explore that reality, Scotland is more than capable of finding it.
As interest rates rise, the wheels have come off a rickety cart long paraded as the only economic game in town