Chancellor Philip Hammond is planning to delay balancing Britain’s books yet again, according to [paywall] The Times.
The paper reports [paywall]:
Philip Hammond is preparing to use the autumn budget to acknowledge that the public finances may not be balanced before 2027.
In part, The Times suggests, the delay is because the government needs more time to pay off the £1bn of additional spending it has pledged to Northern Ireland as part of the Conservatives’ deal with the Democratic Unionist Party (DUP). And in part, it is to pay for the £2bn gap left by the government’s U-turn on national insurance contributions.
The broken pledges
While The Times did not cite a source for its information, and the Treasury said [paywall] that it was speculation, another delay should not come as a surprise to the British public. The Conservatives have made no fewer than five deficit reduction pledges since 2010:
- In 2010, then Chancellor George Osborne said he aimed to eliminate the deficit by 2015.
- He pledged [paywall], in 2014, to eliminate it by 2018.
- In 2015, Osborne announced the national finances would be in surplus by 2020.
- Hammond scrapped that target in 2016, and pledged to eliminate the deficit by the early 2020s.
- In May 2017, the Conservative Party’s manifesto pledged [pdf p66] to eliminate the deficit by “the middle of the next decade”. This was widely understood to mean 2025.
What is going on?
The deficit – the gap between what the government spends and what it receives – skyrocketed after the financial crisis. The public bailed out the banking sector to the tune of £850bn. As The Canary‘s Kerry-Anne Mendoza has reported:
Based on 2009-10 spending levels, this was 1.2 times the annual UK budget. It would have funded the entire NHS (£100bn a year) for eight years, or the whole jobseekers’ allowance bill (£3.68bn a year) for 230 years. This massive injection of public money saw both the budget deficit and national debt explode.
When the Conservatives won the 2010 election, they implemented a punishing austerity regime with the stated aim of quickly eliminating the deficit. But even on its own terms, austerity has failed. Conservative chancellors have repeatedly missed their own deficit reduction targets. And in the process, they’ve stalled the economy, given us what some say is the UK’s slowest recovery since records began, lost the UK its AAA credit rating, and driven an explosion in both public sector and private sector debt.
The human cost
All of this has come at a very real human cost.
Four million children are living in poverty. Food banks are handing out record numbers of parcels. England’s schools are in crisis. Adult social care has been cut to the bone. The NHS is facing crisis after crisis. More than 400,000 public sector workers have lost their jobs – and those that are in work have had to cope with a seven-year-long pay cap. Disability benefit cuts have caused misery to many thousands of people. And while the poor are getting poorer, the rich are getting richer.
The solution? More austerity
The Tories’ latest U-turn shows – once again – that austerity isn’t working. Yet The Times reports [paywall] that Hammond wants to continue with austerity at full speed:
Despite the change, Mr Hammond is likely to resist requests for cash injections into government departments, particularly over public sector pay, and he is opposed to offering new funds without the promise of reform. This is making him more unpopular among some cabinet colleagues who bristle at his approach to the public finances after Labour made gains at the general election opposing austerity.
The real solution
The Tories have proven yet again that you can’t trust them with the economy. Because unless you’re very rich, they don’t run the economy for you. Yet Clement Attlee proved after the Second World War that it is possible to reduce the national debt (as a proportion of GDP) at the same time as rebuilding the country. We urgently need a government that will do that again.
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