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General Election: How politics became obsessed with deficit reduction

General Election: How politics became obsessed with deficit reduction

Of all the topics David Cameron would have chosen to talk about in the run-up to the general election, you could understand if food banks were bottom of the list.

Certainly that is how it looked when, just seconds into a general election TV interview, Jeremy Paxman brought up the topic.

Reminding the Prime Minister that the number of food banks in the UK has proliferated during his time in office, rising from 66 to 421, he said: “You talked about broken Britain and fixing it. You haven’t.”

Cameron looked uncharacteristically nervous. Stumbling over his words, he said: “Obviously there has been an increase in food-bank use – that’s partly because of the difficulties [in the UK economy]... It’s also because we’ve changed the rules. The previous government didn’t allow jobcentres to advertise the existence of food banks.” 

In 2012/13, The Trussell Trust – the UK’s biggest food bank operator – provided three days’ food to more than 347,000. In 2013/14, it was 900,000 people. The number for 2014/15 is projected to be more than a million.

In the minds of the public, the injustice of being forced to turn to charity to eat has become a byword for the effects of austerity. This election, more than any other in recent memory, has been dominated by questions over the economy and who it exists to serve.

And the focus may be understandable. The 2008 financial crisis was the biggest economic crash in living memory. Its shadow loomed large over the 2010 general election, and it has yet to diminish.

The argument repeated by the Tories over the last five years is a simple one – spending profligacy brought the crisis and only austerity can bring a recovery. 

The country needed tough decisions, the party argued. If an addiction to spending caused the collapse, the logic went, then massive reductions in public spending were the cure.

And spending cuts have been dramatic. In fact forecasts from the International Monetary Fund show that, out of 29 leading industrial countries, only Iceland and Ireland delivered faster cuts to public spending, as a share of national income, than the UK attempted between 2010 and 2015.

It is hard to say how successful the strategy has been. Broadly, the so-called ‘greenshoots’ of growth began to emerge at the beginning of 2013, with the Office for National Statistics (ONS) recently reporting the longest sustained run of quarterly growth since the 2008 crash.

The jobs figures are better too, with unemployment across the UK falling by 76,000 to 1.84 million in the three months up to February, its lowest since 2008, according to the ONS.

In Scotland, though, the figures were not so promising, with unemployment rising by 9,000 over the same period, reaching 167,000.

Meanwhile, though low inflation means real wages are growing, figures from the Resolution Foundation suggest they are still down at 2004 levels. 

"It’s not right that the wealthiest 10 per cent of households have 20 times more wealth than the least wealthy 30 per cent"

Pointing to these figures, Labour continues to argue that the UK is facing a ‘cost of living crisis’. 

But while there is no way of knowing whether things may have been different if the UK had chosen to adopt Labour’s more relaxed spending targets – whether the recovery may have come earlier or later – the human effect of austerity is clear.

Recent stats from the Scottish Government show the extent of inequality, with the least wealthy 30 per cent of households owning just two per cent of all personal wealth in Scotland. Meanwhile, the richest two per cent of households own 17 per cent.

And while the figures demonstrate a slight reduction in inequality of total wealth in Scotland between 2006/08 and 2010/12, it was caused, largely, by a fall in the value of pension wealth owned by the wealthiest, rather than increases in ownership by the least wealthy households.

Inequality forms the common thread running through the various arguments over the economy, and it is clearly high on the public’s list of concerns, with 83 per cent of Scots saying the gap between those on the highest and lowest incomes is too large.

Alex Neil, Cabinet Secretary for Social Justice, responded: “It’s not right that the wealthiest 10 per cent of households have 20 times more wealth than the least wealthy 30 per cent.
“We need concerted action to tackle inequality, yet even the UK Government’s own analysis shows that households with the lowest incomes are bearing a greater burden from public spending cuts – an astonishing admission that austerity is hitting the poorest the hardest.”

Meanwhile a report from the Joseph Rowntree Foundation (JRF), Monitoring Poverty and Social Exclusion in Scotland 2015, provides a snapshot of how poverty has affected different demographics.

Some of the headline figures look good – with 230,000 fewer people living in poverty in 2012/13 than ten years before.

It also shows that progress has been made in reducing the number of children living in poverty, which fell from 33 per cent in 1996/97 to 22 per cent in 2012/13. 

Poverty among pensioners has dropped even further, from 33 per cent to 11 per cent.

"It’s a disgrace that in a country as rich as ours so many people have to rely on being fed by charity"

Yet in other demographics the numbers are much bleaker.

The report shows that adults under 30 are the only age group to have seen an increase over the last ten years; in fact, they are now at higher risk than any other of experiencing poverty in Scotland.

Part of the reason for poverty among the under-30s lies in high unemployment, as well as low pay – with ONS stats showing that in 2013, around three million people in Britain were living in relative income poverty despite being in employment.

Overall the problem persists. Scotland is one of the richest nations on earth, yet 920,000 people are considered to be living below the poverty line. 

The fact that Scotland fares slightly better than the wider UK is partly because of lower housing costs.

Aleks Collingwood, Policy and Research Manager at JRF, says: “Scotland has a slightly lower overall poverty rate than the UK as a whole (19 per cent compared with 21 per cent in 2012/13). Lower housing costs in Scotland than England in both social rented and private rented accommodation certainly make a contribution to this. It is also possible that lower levels of low pay and in-work poverty in Scotland have an effect.”

The report says: “The number of people living in poverty in the private rented sector has risen sharply, whilst falling in the social sector and among owner-occupiers. Twenty-nine per cent of people who are in poverty live in the private rented sector, up from 11 per cent 10 years ago.”

Perhaps the clearest point from the research is that poverty is not an accident. It is the result of human action, and it is something we can control.

As Collingwood puts it: “The steep fall in pensioner poverty and the smaller fall in child poverty since the 1990s shows that sustained government policy alongside an improving financial environment can really make a difference.  UK Government policy around tax credits and child benefit on the back of steadily rising levels of employment and pay (up until the recession) impacted positively on both of these groups.”

The possible solutions aired by JRF include the introduction of the living wage and increased opportunities for in-work training, building more affordable homes near places of work, more effort to reduce the educational attainment gap, and better communication with jobseekers, so that sanctions are only used as a last resort.

Inequality is a global issue, particularly as economies integrate across nation state boundaries – with work like Thomas Piketty’s Capital in the Twenty-First Century serving as a reminder that, far from being reversed as capitalism develops, global inequality is increasing. 

Oxfam made the same point at the World Economic Forum in Davos, warning that the combined wealth of the richest one per cent of people on earth will overtake that of the other 99 per cent this year, if nothing is done.

And domestically, the debate is not new either. 

The referendum drew these arguments to the fore – in some ways, inequality defined the debate – with Yes campaigners claiming that the powers brought by independence were the only ‘guaranteed’ way to reverse growing numbers of children growing up in poverty.

Better Together, meanwhile, argued that the UK’s role in ‘pooling and sharing resources’ made it a better vehicle for combating inequality than a smaller independent Scotland with more limited fiscal options would be.

"Sustained government policy alongside an improving financial environment can really make a difference"

And with the General Election, these arguments have reared their head again – with both Labour and the SNP arguing that the economy must be rebalanced to help those hit hardest by austerity. 

Even David Cameron has got in on the act, using his manifesto launch to label the Tories “the party of working people”. 

Jim Murphy has continued to use the rhetoric of Better Together, attempting to harness the potential of the UK as a framework for wealth redistribution – promising that he would use the proceeds from a UK-wide ‘mansion tax’ to fund 1,000 more nurses than whatever number the SNP promises.

Announcing the policy, Murphy said: “We will tax houses in London and the South East to pay for 1,000 new nurses in the Scottish NHS. It’s a real win-win for Scotland.”

The policy was a headline grabber, with right-wing commentators accusing Murphy of robbing the south of England to win friends north of the border. Murphy even managed to anger Diane Abbott.

This may well have been exactly what Murphy had been hoping for – since the idea is a pretty clear way of highlighting the advantage to the UK.

Further policy announcements have followed a similar logic, with Murphy attempting to highlight an area of inequality and show how Scotland’s relationship with the UK can help solve it.
In fact Murphy’s time as leader has been marked by a frantic drive to tour examples of inequality. 

"It’s simply untrue to say that we are 'all in this together'"

During a recent visit to a food bank, he announced: “The number of Scottish families forced to depend on food handouts has rocketed in the last three years. It’s a disgrace that in a country as rich as ours so many people have to rely on being fed by charity. It’s time to call a halt to food poverty in Scotland.

“And for many other people, they are just a broken fridge or boiler away from being in serious financial trouble. After five years of the Tories, even having a job doesn’t guarantee freedom from poverty.

“Labour will abolish the Tories’ bedroom tax and we will use the savings to establish a £175 million Scottish Anti-Poverty Fund.”

He said: “We will build the fairest nation on earth. That will start with a UK Labour Government in May.”

The message is clear – the Tories will not eliminate poverty and the SNP, lacking the UK-wide stretch of Labour, is powerless to do so.

But while Murphy has been touring food banks, Nicola Sturgeon has not been sitting still, attacking the politics of austerity on both moral and practical grounds.

The most obvious example of the FM’s approach was her speech at University College London, in which she offered a blistering critique of the perceived consensus.

Speaking with a passion that made UK-wide media take notice, the FM said: “It’s simply untrue to say that we are “all in this together”. The cuts have had a disproportionate impact on women, disabled people, and those on low incomes. The most vulnerable are bearing the heaviest burden.

“In my view, this human cost is in itself too high a price to pay for current policies. I see its consequences every week in my constituency. But what makes it even worse, is that these policies are not actually serving their wider purpose.”

And while much of what Sturgeon said was aimed at coalition policy, Labour did not escape unscathed either.

She said: “By taking a different approach – by offering an alternative to the austerity agenda of both Labour and the Tories – we would ensure that fiscal consolidation is consistent with a wider vision of society; a society which strives to become more equal, as part of becoming more prosperous.

“We simply don’t accept that there’s a trade-off between balancing the books and having a balanced society; fairness and prosperity can go hand in hand. Indeed, I’d put it more strongly – they must go hand in hand.”

And the comments obviously hit a nerve, with Ed Balls responding, during a speech in Glasgow, to say: “I want to explore the aching gap between the SNP’s austerity-ending rhetoric and their austerity-extending policy. Because the inconvenient truth for the SNP is that there is no consensus at Westminster on austerity.”

He added: “The fact is the biggest lie in this general election is the claim that the SNP are the anti-austerity party when, in fact, they are the additional-austerity party.”

So the debate rages on. Some will question how a Labour Party that backed George Osborne’s last budget can claim to be opposed to austerity. 

Others will highlight SNP plans not to raise spending at all in 2015/16, with critics going further to ask how a 0.5 per cent increase in spending constitutes a ‘reversal of austerity’.

But despite SNP rhetoric, there are significant differences between Tory and Labour plans. Labour has stated its intention to either balance the current budget or achieve a surplus. The Institute for Fiscal Studies (IFS) found this would, on current spending levels, allow Labour to borrow about £25bn a year – meaning either spending cuts, or tax increases, of about £7bn after 2015-16.

"Lest there be any doubt, there is a big difference between £7 billion of cuts and £33 billion of cuts."

The Conservative Party, in contrast, wants to achieve a surplus on the overall budget, which means it could not borrow to invest. This would entail spending cuts of around £33bn after 2015-16.

As IFS director Paul Johnson puts it: “Lest there be any doubt, there is a big difference between £7 billion of cuts and £33 billion of cuts.”

He added: “In fact the difference between the parties may be even greater than that. If you take the plans set out in the Autumn Statement at face value, spending cuts of more than £50 billion could be required after 2015-16. It was this apparent ambition that led the Office for Budget Responsibility to warn that spending on public services could fall to its lowest level since the 1930s.”

Yet, despite the animosity between SNP and Labour supporters, a sense remains that the difference between their respective approaches is fairly small – with work from the IFS suggesting that Labour could match SNP plans for a moderate increase in spending and still meet its proposed fiscal targets. 

With the SNP keen to strike up a ‘progressive alliance’ in Westminster, even mimicking Labour in its support for a ‘bankers’ bonus tax’ and reinstatement of the 50p tax rate, this may be no surprise.

Clearly though, spending levels make a significant difference to poverty levels. The JRF reports says as much, concluding that poverty is not an accident, that policy does makes a difference – for good or bad. 

Releasing the report, Julia Unwin, Chief Executive of the JRF, said: “Falls in child and pensioner poverty over the past decade in Scotland show that poverty can be reduced. But sustained action must be taken to stop a lack of high-quality work, and a shortage of affordable homes from trapping a generation of young people in poverty.”

But this conclusion raises further questions, namely, if it took years for the effect of changes to tax credits and childcare benefits to show, how long until austerity’s true legacy becomes apparent? What do attempts to reduce the deficit mean for poverty in Scotland?  

"You talked about broken Britain and fixing it. You haven’t."

In fact the only certainty appears to be that, whatever the outcome of the election, the UK will have a government committed to deficit reduction as a top priority.

In the days and months following the financial crisis, with the banking system reeling – and looking likely even to collapse – the idea that it was spending profligacy which had caused the crash, and that reducing the deficit must come first, took root.

By the 2010 General Election, the idea had started to gain ascendancy. Fast forward to 2015 and it is hegemonic, in fact no party with a shot of power rejects the premise that reducing the deficit and pushing the economy towards recovery are one and the same. 

Regardless of anti-Tory rhetoric, both Labour and the SNP accept that any effort to tackle inequality must take place in the context of deficit reduction. 

The Lib Dems too are committed to the same course, with their election strategy based around cutting less than the Tories and spending less than Labour.

Meanwhile, the issue of full fiscal autonomy and its possible effect on Scotland’s finances remains unresolved. 

So the economy, along with the effect of spending plans on the lives of the country’s most vulnerable citizens, remains central to the general-election campaign, but it is deficit reduction that, more than anything, unites the UK’s main political parties. The debate over inequality will rage on, but it seems set – some would say doomed – to take place within the prism of deficit reduction. 

In the same TV debate in which Cameron stumbled over the growth of food banks, inequality raised its head for Ed Miliband too – though in his case, the Labour leader volunteered the subject himself.

Asked which parts of the last Labour Government’s record he regretted most, Miliband answered, “We were too relaxed about inequality; I think the gap got bigger.”

The General Election result may go a long way in deciding what happens next to the gap. However, who will regret what remains to be seen.  

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