Stephen Colegrave on why using austerity to justify the right-wing claim that the ‘cure is worse than the disease’ is so damaging in the fight against the Coronavirus.
During my days at Saatchi and Saatchi, I worked with the political advisor and commentator Steve Hilton. We went together to sell our political advertising wares to the Czech Government and he seemed like a nice, level-headed guy.
So I was shocked to see him on Fox News on Sunday night citing the numbers of people who died in the UK because of austerity and using this to support his claim that the “cure is worse than the disease” when it comes to the current crisis of COVID-19.
“A UK study calculated that 130,000 people died from austerity there, the cost of this shutdown [in America] will be worse,” he said. “You think it’s just Coronavirus that kills people.”
What Hilton did not mention was that he was advising the then Prime Minister David Cameron when the Government policy of austerity was instituted. And austerity was a Government policy – not an unavoidable economic consequence caused by a global health pandemic such as the Coronavirus.
Hilton would never have conceded at the time that austerity would lead to any avoidable deaths at all, but he is now content to hijack a left-wing argument over its human cost and use this to support US President Donald Trump’s determination to prioritise markets over people and have America open for business again by Easter.
Trump, the very rich and others like them watch the stock markets every day, focused on their short-term losses or gains. Any disruption upsets them. The last thing they want to do is give even more money to rebuilding society after the Corornavirus crisis passes. To my mind, they are like the victorious allied powers after the Treaty of Versailles and what we need is more of a Marshall Plan mentality.
But, worryingly, others followed Hilton’s lead. The journalist Max Hastings saw fit to tell viewers on BBC Radio 4’s The World at One about how selfish the older generation was being by expecting everything to stop for a lockdown. Right-leaning newspapers also ran stories on an unpublished and non-peer reviewed paper by Philip Thomas, Professor of Risk Management at Bristol University, that purported to show how keeping the UK economy going is essential, otherwise the steps being taken to tackle the COVID-19 outbreak would be doing “more harm than good”.
But, Jonathan Portes, Professor of Economics and Public Policy at King’s College London, has dismissed such claims and makes clear that unavoidable deaths caused by austerity were because of Government policy, not the recession which followed the 2008 financial crisis.
“It wasn’t the sharp fall in GDP in 2008-9 that reduced, over the course of the next decade, life expectancy for the poorest in our society,” he wrote in The Guardian. “It was how the Government chose to address the economic fallout of the global financial crisis – by underfunding and understaffing the NHS and social care, and by eroding the basic welfare safety net that people depend on when times are hard. As we are now discovering, these were false economies that left us less, not more, prepared for this crisis.”
Perniciously linking the recession and austerity to poor human outcomes, and then using this to make a case against interventionist policies to tackle the Coronavirus, must be stopped in its tracks.
Governments don’t have to cut services and risk people’s lives as a result of financial crises. They can decide to invest in them – whether that requires more borrowing, taxation or refocusing the budget.
Thatcher’s Long Shadow
In implementing austerity to deal with the 2008 financial crisis and recession, the Conservatives arguably decided to follow the ‘household fallacy’, which has its roots in Margaret Thatcher.
“I can’t help reflecting that it’s taken a Government headed by a housewife with experience of running a family to balance the books for the first time in 20 years – with a little left over for a rainy day,” she told the Conservatives Women’s Conference in 1988.
But, Governments can’t be operated in the same way as households. It is not the case of simply having to “balance the books” when times get tough as a household would do. Households do not have to fund public services or invest in jobs and infrastructure.
Since the Conservatives came to power in 2010, the national debt has doubled to £2 trillion. In 1997-1998, public sector debt as a percentage of GDP was 40.4%; in 2007-2008 it was 36.4%; in 2010-2011 it was 60.0%; and in December 2019 it was 82.9%.
Where did this extra trillion pounds of public debt go? Certainly not into the NHS or social care, which were starved of money, nor to local government services, which were savaged by cuts of up to 60%. This was a political decision, not economic destiny. If maintaining public services and a safety net of adequate social benefits was at the top of the political agenda, the 130,000 avoidable deaths due to austerity would not have occurred.
The irony is that, not only did austerity not have much of an impact on debt, it actually shrunk the economy and its ability to employ people and pay taxes. According to the think tank, the New Economics Foundation, the UK economy is estimated to be up to £100 billion smaller because of austerity.
Yes, a recession following the Coronavirus crisis is likely, but we don’t have to make the mistake of thinking that the only way out of it will be austerity – which is a politician-made policy and not an economic given. The cure does not have to be worse than the disease.
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