Austerity: Osborne and Britain’s Spending Cuts

The British feel that the world is watching. Trimming (nay, slashing) the public sector, which will take money out of a shrunken economy rather than keep it circulating in the system, is something that the financial wizards of the Cameron government are trying to implement. The only ones who might be watching the Cameronians with delight are fellow austerity watchers. The British Labour party, in a desperate bid to capture voter sentiment, has also adopted the anti-deficit line. Alistair Darling’s speech of September 27th to the Labour party conference intoned about an ‘electoral disaster’ if debt was not cut. Bipartisan mania against the bloated public sector is now assured, with house-hold analogies (‘government deficit is just like credit card debt’) employed with mind-deadening frequency.

Leading the charge to the cold climes of austerity has been George Osborne, Britain’s Chancellor of the Exchequer, whose austerity announcement in cutting public spending by 10 percent over four years came as no surprise. Historically, it has only been equalled by the Geddes Axe of 1921, when 11 percent of government spending was cut over two years. The Guardian (Oct 22) sees the Osborne strategy as threefold. First, that the cuts are ‘fair’, targeting those with the ‘broadest shoulders’ who should ‘bear the greatest burden’. Second, that health and education have been sealed from devastation – that money, at least for schools, would even go up in ‘real terms’. Finally, that the cuts are barely distinguishable from what Labour had previous proposed. There are elements of the progressive, mixed with elements of the brave and radical. This was conservative fiscal responsibility, coloured by red, or at the very least, Liberal Democrat compassion.

The government has certainly been cunning in its advertising. The public sector will be hacked, but various key areas shall be spared the machete of anti-debt enthusiasm. Then there is the argument that the cuts will be staggered – not all 500 thousand jobs will be lost in one fell swoop, but implemented over a period of four years. Besides, surely those dear souls will exhibit a bit of industry at some point and join those conscientious creators of wealth in the private sector?

The Institute of Fiscal Studies has spoiled Osborne’s party in more ways than one. For one thing, the Labour proposals, while savage, were not as savage. The impact on the poor, to take another, will be far more significant than forecast. While the broad shoulders of Britain’s top-end will take some of the burden, the bottom 10 percent will be devastated. Disability benefits will take a hit. Nor will schools be spared, with funding falls projected for 60 percent of primary school pupil and 87 percent of secondary school students. The overall quality of services is bound to suffer.

In a sense, we are hearing calls that this government is one of the more radical ones in recent memory. This is true in terms of cuts. But what it is doing is, in truth, far from radical. It is deeply conservative, suggesting that the Liberal Democrat influence is proving to be rather less impressive than first thought. There has been a retreat to austerity, a cultivated aversion to deficit spending in the form of stimulus injections. Deficit deniers are being hung out to dry, and the rhetoric of ‘not spending what we don’t have’ ascendant in the party rooms. Ignorance of the fact that Britain has been borrowing at cheap rates under both Labour and now the Coalition is cultivated. (‘We are not like those Greeks, for goodness sake.’) The fiction that a government’s kitty resembles that of the standard household is disseminated.

As Robert Skidelsky has persuasively argued at the Northern Ireland Economic Conference (Sep 29), another narrative might have been used had Labour been more astute. Stay the course on Keynesian economics. Explain that deficit was only the by-product of saving an under-regulated banking system to stem the collapse in private spending. Labour, however, decided to join the retreat to austerity. It is a retreat that may well prove disastrous.

Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge. He lectures at RMIT University, Melbourne. Email: bkampmark@gmail.com

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