So we want to talk a little about Austerity, its a term that gets used a lot. We are told we need it in order to improve the economy but people have marched against it all over the country, so what are we actually talking about?
Well for a starters it is probably important to point out that Britain is not a poor country. In fact the UK is the sixth richest country in the world and, before the recession, between 1993 and 2008 it saw 15 years of sustained economic growth.
In 2008 there was a global financial crisis. The banks had lent too much money to too many of the wrong people and were in debt themselves. The UK government chose to bail out British banks in order to prevent a collapse of the British banking system that would cause an even deeper depression.
At the same time, the government also began trying to stimulate spending. They reduced VAT and spent more on schools and social housing to try and encourage people to spend and to keep the economy as strong as possible.
Austerity
Since 2010 the government led by the conservatives in coalition with the Liberal democrats and now the Conservatives alone, enforced austerity. This was mostly in the form of deep spending cuts with only small increases in tax.
The stated aim of austerity was to reduce the deficit in the UK by cutting spending, to give confidence to the markets and therefore deliver growth to the economy.
BUT....
Whilst austerity measures have had some impact on reducing the deficit, they have delivered very little growth, and public debt has risen.
Austerity policies have also had a huge impact on the poorest people in the UK. In 2010, the government announced the biggest cuts to state spending since the Second World War, including big cuts to social security and the planned loss of 900,000 public sector jobs between 2011 and 2018.
Since the financial crisis began the poorest and most vulnerable in our society have had their situation made far worse.
The cost of living has continued to rise, whilst cuts to social security and public services, falling incomes, and rising unemployment have created a damaging situation in which millions are struggling to make ends meet.
Tell us about it: How have you and your family been affected? Do you have less money to spend in the month now than you did 10 or more years ago? How have families around you been affected?
Inequality
The biggest impact of austerity is a huge rise in inequality.
Cuts to public services and changes to taxes and welfare have hit the poorest the hardest.
In fact the poorest tenth of our population have seen a 38% decrease in their net income since 2010.
By comparison, the richest tenth have lost the least with only a 5% fall.
There is also continuing evidence that the very richest are doing far better.
At the very top, Britain’s richest 1,000 individuals saw their wealth increase by £138bn in real terms between 2009 and 2013.
https://www.oxfam.org/sites/www.oxfam.org/files/cs-true-cost-austerity-inequality-uk-120913-en.pdf
It is good for our economy if people can do well, make profit and invest but that investment needs to have a positive effect for all and not just the few.
Instead, measures designed to stimulate the economy have resulted in significant gains for the richest, while the poorest tenth are taking home even less.
Policies that were designed to increase the share of tax paid by the rich so that all of society can benefit from economic growth have been watered down. There has been a reduction in the top rate of income tax for those earning over £150,000, from 50 to 45% and a fall in Corporation tax on businesses at a time when the UK’s top companies are doing better than ever.
Meanwhile 1 million people used food banks in 2014-15 and with on-going cuts those figures are set to rise http://www.trusselltrust.org/stats
For those in work, average hourly wages have fallen http://www.ons.gov.uk/ons/rel/elmr/an-examination-of-falling-real-wages/2010-to-2013/art-an-examination-of-falling-real-wages.html and there has also been a change in the type of jobs available - temporary work, part-time work, self-employment (with no employment rights) and zero hours contracts with no guaranteed minimum income, have all increased.
As the UK returns to growth and business owners begin to see good profits and a rise in income, there are rising levels of insecure work, high unemployment and the reduction of the benefits that reduce poverty and lower inequality. On top of this the latest budget announced cuts to tax credits for working families.
Housing
Currently about 14% of the national benefit bill goes to housing benefit, most of this going straight into the pocket of private landlords, many of whom own large amounts of property.
The recent budget announced an end to housing benefits for under 25s. This makes little difference to richer families who can afford to assist their children in buying or renting property but has a huge impact on poorer families who can't afford to help and to young people who for lots of reasons cannot stay at home with their parents.
Meanwhile councils now struggle to offer social housing, their stock reduced by decades of the right to buy policy.
There is now a housing shortage in many regions which has caused rents to increase massively. The benefit caps that reduce overall payment have also meant many families can no longer afford these rents.
For all of these reasons many councils are now unable to permanently rehouse families. The number of homeless families housed in B&Bs has increased by 300% in the last 5 years. http://www.theguardian.com/society/2015/jun/24/homelessness-england-families-temporary-accommodation-bed-and-breakfast?CMP=share_btn_tw and homelessness overall has increased by more than 50% http://www.mirror.co.uk/news/uk-news/homelessness-up-more-50-per-5235998
Meanwhile the recent budget reduced the tax paid by those who are inheriting expensive properties from family members - another measure that benefits families who already have wealth but of no benefit to low or middle income families who can't afford expensive property.
Support for Austerity
There is some popular support for austerity. For example, lots of people feel we need to balance the books and live within our means and that austerity is helping achieve this. Many also want to see welfare 'dealt with' believing that there is a culture of "something for nothing" and people choosing to live on benefits rather than working. So what about these issues?
It is easy to think that people on low incomes receiving tax credits and those on benefits are somehow choosing to remain poor or are not working hard enough and there are always plenty of stories in the newspapers (which are mostly owned by very rich individuals, some of whom pay no or very little tax in the UK) about "benefits scroungers" but in actual fact 50% of children living in poverty in the UK are from working families and as we have already pointed out it is the lowest earners who have lost the most overall due to austerity.
In the UK the welfare bill is divided like this -
Overall only 10% is paid out to those not working, the vast majority is to pensioners and a bigger chunk goes to private landlords. Perhaps if we invested more in social housing that bill would come down?
With public sector cuts, there is less support in place for adult learning and less help to find work. Perhaps with more investment there that 10% paid out to the unemployed may also reduce?
At the moment the biggest drops in income and the largest percentage of that income paid in tax is by the poorest in the UK
In the long run many would argue it is short sighted to continue to avoid taxing high earners whilst penalising low income earners, because in the end not having enough money stops people from spending.
The poor are getting poorer and the rich are getting richer. Continuing to ignore tax avoidance and reducing the tax paid by businesses and rich individuals whilst reducing benefits and income to the poorest will not fix this, it will make it worse.
It is only through increases in income for the working majority and through greater equality and security, that we will see spending and prosperity improve for everyone and not just the elite few.
As an economic program, austerity, under recession, makes no sense. It just makes the situation worse http://www.alternet.org/economy/noam-chomsky-austerity-just-class-war?sc=s&utm_source=facebook&utm_medium=socialflow
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