Austerity is a political choice not an economic necessity

The Tory government is sticking to plans for more austerity, no matter what the economic or human consequences, writes Ken Livingstone.

Since my last Morning Star column, a leading think tank has forecast a £25 billion hole in the public finances by the end of the current parliament.

The Institute for Fiscal Studies (IFS) report says that lower growth forecasts and higher inflation will leave government tax receipts £31bn worse off in 2019-2020 — turning a forecast surplus of £14.9bn into a deficit of £10.4bn.

Additionally, an internal briefing document showing that the government is “unlikely to bring deficit reduction entirely back on track” was mistakenly posted online.

The briefing, marked “sensitive: for internal use only,” was accidentally published on a government website and says that a continuing run of “disappointing data” is leading to “slow deficit reduction.” It says that “for the year to date the deficit is £2.3bn lower than last year; at a fall of 4.8 per cent, well behind the 27.0 per cent reduction forecast.”

The leaked document illustrates how borrowing is up on last September by £1.3bn and further to that £2.1bn above market expectations. The slow deficit reduction is primarily blamed on central government receipts shortfalls, which at 3.6 per cent is below the 5.9 per cent required to meet budget forecasts.

This is because of lower tax contributions and slower wage growth — problems that are of course exacerbated by the government’s ideologically driven austerity problems.

In response to these developments, shadow chancellor John McDonnell was right to say that Chancellor Phillip Hammond should not use this as a reason to press on with more austerity after “six years of Tory failure on the economy… which has meant our economy is not properly equipped for any downturn that may arise from Brexit.”

While there can be no doubt that the EU referendum and the government’s lack of a plan to deal with a Brexit vote have led to a deepening of these problems, it’s important to note that this damage has not happened overnight.

Over the last six years, the government has been warned again and again by economists that their fiscal approach risked giving us a weak recovery and repeatedly disappointing tax receipts.

Yet, as well as promising more of the same when it comes to austerity and cuts, Hammond has said he could take the option of halving corporation tax from the existing rate of 20 per cent if talks over Brexit fail to deliver access to the European market.

In fact, Tory tax giveaways in the last parliament to big corporations have not only had to be paid for by huge cuts to our public services and benefits, they have had no positive effect on increasing business investment as corporations sit on billions of earned income and Britain’s long-term economic problem of chronic underinvestment have intensified.

As McDonnell put it in his recent Mechanics Institute speech we have seen: “years, stretching into decades, of underinvestment and of the slow draining of hope and pride from places that were once thriving communities.”

Even before the economy hits choppier waters ahead, we have also seen further illustrations of the shameful human misery that austerity has caused in Tory Britain.

We cannot repeat enough that not only is austerity a political choice not an economic necessity that the British economy needs like a hole in the head, it also has real consequences for millions of people that the government must take responsibility for.

Since my last column, three major developments have shown in particular how austerity is failing millions of children.

An End Child Poverty Coalition’s report has shown that in some areas of Britain 47 per cent of children are living in poverty — over half of those are in working households.

We have also seen a shocking report from the Trussell Trust which showed half a million emergency food parcels have been distributed by foodbanks in six months, meaning that in the run-up to Christmas almost 200,000 children will be relying on a food parcel to get a decent meal.

In response, Labour’s Debbie Abrahams was right to identify both delays in benefits payments and changes to eligibility as a major cause behind this increase.

In response to these developments Labour is rightly calling for the full reversal of damaging cuts to universal credit which will leave 2.5 million working families on average £2,100 worse off, and has announced it would scrap the Tories’ punitive and inhumane sanctions regime.

And new child homelessness figures from Shelter showed over 120,000 children are facing homelessness this Christmas.

As Labour’s John Healey put it: “Six years of failure on housing has led directly to today’s rapidly rising homelessness.

Since 2010, ministers have ended funding for genuinely affordable social rented housing, cut housing benefit for families on low incomes, done nothing about rising costs and insecurity for private renters and slashed funding for homelessness services by almost half.”

Further planned cuts to housing benefit and the hated Housing Act will make this problem of growing homelessness worse.

Additionally, shocking evidence of the disastrous consequences of austerity were shown in inquiry findings by the United Nations Committee on Rights of Persons with Disabilities that found reliable evidence that the Tory government is responsible for grave violations of the rights of disabled people.

More austerity will only lead to these shocking reports becoming more and more commonplace, but there is an alternative.

The coherent alternative economic strategy being put forward by the Jeremy Corbyn-led Labour Party, which is not only strongly opposing the government on issue after issue but also presenting positive alternative policies that are underpinned by a credible economic policy framework.

Labour is right — this month’s autumn statement should be used to deliver a major programme of investment for the whole country, bringing about the high-wage, secure jobs that will make sure no part of our country is left behind. Millions of people literally can’t afford anything else.

First published in the Morning Star