Coronavirus is no reason for more austerity

By Bernadette Meaden
April 14, 2020

Apparently, measures taken by the government in response to coronavirus mean the UK is now on course to have the largest budget deficit since World War Two. This should not be used to justify austerity. Instead we should remember what we chose to do as a nation in the years after World War Two. Clement Attlee's government established the NHS and the welfare state and built more than a million homes, 80 per cent of which were council homes. People’s wellbeing was prioritised.  

After the global banking crisis, we were told that we were all in it together, that the pain of the measures that needed to be taken would be shared equally amongst the population. As it turned out, austerity was intensely concentrated on the poorest and most disadvantaged people and essential public services.

It is understandable that many people were taken in by the arguments for austerity. They had never been in such a situation before, and tended to believe politicians who told them that austerity was necessary, the government was like a household, we had to balance the books, pay off the credit card bill etc.  It was just a coincidence that these same politicians had spent their whole careers believing in a smaller state. 

As we now enter a similar period, when the world has experienced a great economic and human shock, we need to decide what path to take for the future, and what should change. We must be on our guard to ensure that the poorest people and public services are not made to pay for this crisis too.

Many on the right are calling for an early end to the lockdown, arguing that an economic recession will result in more deaths than the pandemic. Strangely, whenever it was suggested that austerity had led to deaths, these same people often dismissed it as scaremongering or shroud-waving. But even so, as economist Frances Coppola points out, “Recessions needn't cost lives. If they do, it is because of bad policy responses, such as cutting unemployment benefit to force people to look for work, or cutting expenditure on healthcare and frontline social services to 'balance the books'."

The choices made by politicians can undoubtedly cost lives, whether it is a decision to go to war, not to stockpile PPE in case of a pandemic,  or to make people destitute by cutting social security. But they are just that – choices – and we must resist such choices being made as we emerge from this crisis.

Already, the idea of more austerity is being talked about, and in some quarters accepted. Today, a policy paper from the Social Market Foundation (SMF), Intergenerational fairness in the coronavirus economy was welcomed in much of the press. The paper talks about Austerity Round Two, and says that "intergenerational fairness" should  be achieved through removing the triple lock on the state pension, to save money by making it less generous in future. “Pensions would still rise, but less quickly, reducing the fiscal burden on the working-age population.”

Now, there’s no doubt that when George Osborne introduced a triple lock on pensions whilst slashing the incomes of poor working-age people it was unfair, and motivated by political self-interest. But many UK pensioners are still living in poverty, and our state pension is miserly in comparison to many other European countries.  Making an inadequate pension less generous would push even more older people into poverty, and is not the way to achieve fairness. There is no need for this to be a zero sum game, where if working age people get a little more, pensioners must get a bit less, and vice versa. That is a political choice, like deciding to spend billions of pounds on nuclear weapons is a political choice.

There is actually no need for Austerity Round Two, just as there was no need for Austerity Round One. Firstly, government debt is extremely affordable – far more affordable than the personal debt which many people are forced into as a result of austerity. But it’s also becoming increasingly obvious, as the veil is lifted, that the government holds the power of money creation, and can use this when it chooses to do so.

On 9 April 2020 it was reported in The Times that, “The Bank of England will directly finance the extra spending needs of the UK government on a temporary basis…allowing the Treasury to bypass the bond market.” Money created by the Bank of England, straight into government coffers, without the need for debt.

As Richard Murphy commented, “Welcome to the new paradigm of government funding where we realise that governments pay for themselves, as some of us have always argued…”  And as former Chancellor Alistair Darling explained in an interview today, austerity is not only wrong but it may be politically unacceptable, saying, “ I suspect that after all this the people will realise that the State is actually the lender and insurer and guarantor of last resort.” (Listen here,  beginning at 1.03.22) 

This is not to say that taxation does not also have a part to play - it must be used to control inflation, and it must be imposed fairly, as Murphy explains here . As vast amounts of wealth have been accumulated by companies and individuals in tax havens around the world, states must be more robust in their efforts to levy tax in a just manner. Random philanthropy from billionaires is no substitute for that.

The fact is, we don’t need intergenerational fairness, we need fairness in wealth distribution, across all ages, and for that we need the ability to think boldly and to free ourselves from the oppressive belief that things have to be the way they are now. We can do so much better.

As Pope Francis recently wrote, in a letter in which he was seen to endorse a Universal Basic Income: “I hope that this time of danger will free us from operating on automatic pilot, shake our sleepy consciences and allow a humanist and ecological conversion that puts an end to the idolatry of money and places human life and dignity at the centre. Our civilisation – so competitive, so individualistic, with its frenetic rhythms of production and consumption, its extravagant luxuries, its disproportionate profits for just a few – needs to downshift, take stock, and renew itself.” 

After ten years of austerity followed by a pandemic, people have suffered enough. We must not accept further suffering due to political choices. There is another way, a better way.

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© Bernadette Meaden has written about political, religious and social issues for some years, and is strongly influenced by Christian Socialism, liberation theology and the Catholic Worker movement. She is an Ekklesia associate and regular contributor. You can follow her on Twitter: @BernaMeaden 

Although the views expressed in this article do not necessarily represent the views of Ekklesia, the article may reflect Ekklesia's values. If you use Ekklesia's news briefings please consider making a donation to sponsor Ekklesia's work here.