Austerity and It’s Impacts on Britain

By | 2017-09-08T07:59:07+00:00 19th July, 2017|

Austerity is constantly being bandied about the media, and has become a typical part of political vocabulary since its introduction by the coalition government in 2010 under David Cameron. The Economist’s definition of austerity is ‘a situation in which there is not much money’ and government revenue ‘is spent only on things that are necessary.’ In this respect, the fundamental idea is that government borrowing is unsustainable, and in order to reduce the structural deficit, austerity has to be enforced to ‘balance the books’ and ultimately aid the recovery of the economy after the financial crash in 2008; avoiding the imminent risk of becoming another Greece.

“Prime Minister, Theresa May insists that Britain needs to live within its means, especially with Brexit looming and the uncertainty which surrounds it all. “

Almost a decade on, we still see austerity measures in place and its subsequent effects rippling throughout the economy. Prime Minister, Theresa May insists that Britain needs to live within its means, especially with Brexit looming and the uncertainty which surrounds it all. In this article I will explore the effects of austerity on ordinary citizens of the UK and conclude as to whether it is still necessary in today’s economic climate. There is a clear disagreement in Westminster as the Labour Party and its leader, Jeremy Corbyn, insists that austere measures are unnecessary and are not only damaging the middle-class but also the most vulnerable in society.

In light of the current anti-austerity mood surrounding the new House of Commons, there has been continual pressure on the Conservative party to scrap the 1% a year pay cap imposed by George Osborne since 2013. After the heroics of the emergency services following the Grenfell Tower tragedy, it is apparent that you cannot budget with regard to safety and security; seven years of cuts to emergency services in particular has seemingly increased our vulnerability. The wage ceiling has been said to have affected around five million public sector workers who have seen their median hourly earnings drop in real terms by almost 6% between 2005 and 2015, with some sectors suffering more drops than others.

Some would argue that austerity has had a greater effect on minority demographics who are more likely to be employed in the public sector, in low paid jobs and insecure work. The teaching profession has seen an average pay fall by £3 an hour in real terms and police officers by £2 an hour, whilst pay for nurses has stagnated. Funding towards education has seen a significant decrease and the effects are plain to see. The Association of Teachers and Lecturers general secretary Dr Mary Bousted said: ‘Adding inadequate pay to the toxic mix of stress and overwork is likely to lead to even more teachers quitting. Even before this announcement more than 50,000 teachers left in the past year.’

Austerity has coincided with massive reforms of the GCSE and A Level courses where exam boards have written new courses and published expensive resources to go with them which represents a significant transfer of public funds into the private sector. In many cases, schools are unable to afford new materials because of tight budgets which jeopardises the futures of students who are not given a chance to reach their full capabilities. With productivity in this country already falling behind the likes of Germany and the US, not investing in education will almost certainly create long term structural problems which could be of detriment to UK GDP and international competitiveness.

The most surprising aspect about this whole situation is that Theresa May has managed to flesh out a whopping one billion pounds in the confidence and supply deal with the Democratic Unionist Party despite asserting that there was ‘no magic money tree’. This surely means that a review of funding for public sector wages, schooling and social care should be carried out? What is more audacious is politicians have seen a salary rise whilst public sector workers, who arguably deserve it more, face a continued cap. Despite Chancellor Philip Hammond suggesting that the pay policy has not changed and there is a need to strike the ‘right balance’, it increasingly seems like the typical jargon spewed by politicians who do not understand the effect their policies are having on people’s lives. With inflation rising at an unprecedented rate since the crash, this means that household spending power will fall which may greatly affect the standard of living of those public sector workers whose income is capped. Pay is not only the issue of austerity that is causing tension for the government; local authorities are being continually squeezed, and approximately 75p in every £1 of central government funding by 2020 will be cut.

 

Research has shown that budget cuts and sanctions against benefits claimants is linked to increasing use of food banks. In a twelve month period from 2014-2015, over a million people in the UK had used a food bank representing a 19% year-on-year increase in food bank use. Trussell Trust, Britain’s biggest food bank network recently reported that it gave out a record 1.2 million food parcels to families and individuals in need in 2016-17, the ninth successive year in which demand has risen. The spread of food banks demonstrates the growing problems of poverty and hunger across the UK and in this respect it is a shame that Theresa May has simply brushed off the increased use of food banks by claiming that there were ‘many complex reasons’ why people use them.

 

According to an investigation conducted by the United Nations into Children’s rights in the UK, austerity and welfare cuts are causing poverty and inequality. By 2020 it is estimated that there will be a 50% increase in child poverty; not only is this an issue in itself but there is plenty of evidence linking poverty to crime and we could well see the rate of criminal activity soar in the coming years. Affected families are expected to be around £300 million worse off in 2017-18, hitting singles mothers, the disabled and ethnic minorities the hardest, whilst threatening at least 100,000 households with homelessness and poverty. The continued stigma surrounding benefits claimants and the culture of ‘scrounging and laziness’ is having a damning effect on those who actually need support from the state.

Austerity has undoubtedly touched the lives of many households across Britain who have experienced both the direct and indirect consequences such as the lack of investment in housing which have seen house prices become unaffordable and the stagnation of wages which have fallen behind inflation. Coupled with the sharp decline in the rate of starting social rental schemes and increasingly risky loans, it is harder than ever for first time buyers to get onto the property ladder, especially with accumulated debts from higher education. Most macro-economists now agree that the austerity programme pursued by the coalition government in its first two years was both too severe and unnecessary, reducing GDP and costing the average household £4000 over the lifetime of the parliament as well as damaging public services which were not ring-fenced. Economist and author, Ha-Joon Chang, writing in 2017, observed that ‘in today’s UK economy, whose underlying stagnation has been masked only by the release of excess liquidity on an oceanic scale, some deficit spending may be good, necessary even’.

We are coming up to a difficult period in Britain’s history with Brexit negotiations already underway, and it would seem counterproductive to fully oust austerity but people cannot be squeezed forever and it makes sense for the government to rethink some of their policies. A cease of the 1% pay cap would have been welcomed and would have almost certainly seen an increase in the growth of the economy, which is growing at a measly 0.2%. Many public sector workers are seeing their incomes rise slower than inflation and this policy change would have gone some way in changing that. Foreign Secretary Boris Johnson agreed that a public sector pay rise can be achieved in a ‘responsible way’ and ‘without causing fiscal pressures’. It has been proved many a time before that if the need is great enough, the ‘magic money tree’ appears and therefore it is up to the Conservative government to make a decision on whether they think that education, emergency services and welfare for the most vulnerable in society are important enough.

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