Today
Sat 23 October 2021

Britain is facing another era of austerity and economic illiteracy, says Maheen Behrana

In June 2020, Boris Johnson pledged not to return the UK to the austerity years of his predecessors. We ought to have known that he wasn’t telling the truth. We now have austerity in all but name. Food prices are rising, as are energy bills. Inflation is increasing at record rates.

Meanwhile, instead of soothing the pain, the Government has made a series of decisions that will only exaggerate the problems of poor and middle-income families. Johnson is presiding over a poverty pandemic, and he doesn’t seem to care.

Cutting the Universal Credit uplift is perhaps the most obvious example of this. At a time when the cost of living is rising dramatically, it seems remarkably cruel for the Government to strip money from struggling families.

Yet the Government seems to be remarkably cavalier about its approach. Johnson has claimed that he doesn’t think food shortages are likely and believes that wage rises will simply offset increased living costs. Work and Pensions Secretary Therese Coffey has declared that Universal Credit claimants can simply make up for the lost £20 a week by working two extra hours.

But both Johnson and Coffey are misrepresenting reality. Johnson’s fabled wage rises are primarily concentrated in the economic sectors that have seen the most acute staffing shortages. They may also only be temporary, and may not do enough to make up for inflationary pressures. Coffey’s claims are patently false – because of the way the taper for Universal Credit works, claimants would actually have to work an extra nine hours a week in order to make up for the lost £20.

It’s easy to accuse Johnson and Coffey of being apathetic; of being so far removed from the reality of normal life that they simply do not understand the implications of the £20 cut.

But it seems that Johnson’s Government is not merely ignorant about the lives of ordinary people. Indeed, more than just social ignorance, it appears to be trading in economic illiteracy.

By actively pursuing policies that push families into poverty, and by failing to tackle the rising cost of living, the Government is engaging in self-sabotage.

A 2016 study estimated that around a fifth of spending on public services went on making up for the negative impacts of poverty and inequality. Research has also suggested that social inequalities cost the NHS £4.8 billion a year. Thus, as inequalities rise, so too does the cost of mitigating against the worst excesses of these inequalities.


A Cycle of Decline

And it isn’t just these direct economic harms that are a problem. A slower, creeping economic stagnation is also a serious consequence of poverty. Everyone will be aware of the shuttered shops which now populate our high streets. This phenomenon cannot solely be attributed to the decline of bricks and mortar retail, especially when low-budget Primark (which doesn’t have an online presence) is doing so well.

Instead, we are witnessing some of the consequences of a decline in disposable income. No matter what your feelings are on fast fashion, the failure of many former household names to keep afloat during the pandemic ought to be seen as a warning sign.

Ordinary people’s spending power is diminishing. Yes, there was a post-pandemic bounce back, but now we see that retail sales are in steady decline and that our disposable income – already below-average for developed countries – is shrinking further.

At the same time, the wealth of already very wealthy individuals is expanding rapidly. The number of UK-based billionaires reached record levels during the pandemic, and their fortunes have increased significantly. So, while 13% of the shops on London’s Oxford Street – aimed at ‘ordinary’ income shoppers – have closed during the pandemic, pretty much all of the luxury shops on neighbouring Bond Street remain open.

We’ve never all been in this together. The richest remain afloat, buoyant in fact, while poor and middle-income people suffer seemingly perpetual stagnation and decline.

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Trickle-down economics is a theory typically favoured by those on the right of the political spectrum. It holds that by cutting taxes for the richest, their increasing wealth will somehow ‘trickle down’ through society via innovation and job creation.

Unfortunately, it doesn’t really seem to work like this. As the rich get richer and everyone else becomes poorer, we start to see our economy narrow. Wealth is poured into the sectors frequented by the rich, while ordinary people spend an ever-greater proportion of their income on basic necessities. Instead of seeing a healthy economy, we see one that is constrained by the fact that spending power is vastly imbalanced.

For any Government to squeeze disposable income is foolish, but it seems especially ludicrous coming from a party that is ideologically wedded to the idea of an economy propped up by free-flowing consumer spending.

What we will now see is increasing inequality – something that our stretched public services will ultimately have to patch up.

Illiberal and illogical, Johnson’s Government prides itself on a combination of Victorian cruelty and economic egregiousness. Nothing adds up and nothing makes sense. It’s simply a fact of British life that things get worse for ordinary people while the elite bask in ever-growing riches.

Maheen Behrana is a senior campaigns and policy officer for the campaign group ‘Best for Britain’. This article is written in a personal capacity 

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