Maintaining the fiction

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Discerning any sense of strategy behind the Chancellor’s increasingly bizarre policy choices is at times a difficult task. Imposing salary constraints on public sector workers in the midst of a pandemic which has shown the value and popularity of those workers is a strangely unpopular thing for a supposedly ‘populist’ government to be doing. It doesn’t even save significant amounts of money  – with inflation likely to be below the 2% target for at least the next 4 years (according to the OBR figures released yesterday), increasing those salaries in line with inflation would cost very little and be much easier to sell as a policy. It would also help to maintain the confidence of some consumers, and hence demand in the economy.

It’s true that spending on the most popular service, the NHS, is to increase, but whether it will increase by enough is another question. It’s almost as though they believe that bandying very large numbers around will impress people and deter them from asking about the detail. Indeed, it’s noticeable that most government announcements start with how much money is being spent as their headline, and tell us little about what we will be getting for the money. For former hedge fund managers, large sums of money may indeed be impressive; for most of us, anything with more than a few zeroes on the end is just a number. The difference between 6 zeroes and 9 is probably meaningless to most voters.

The announcement of a boost to schemes to help people find jobs is one of the most revealing of the policies announced – it underlines the ideological belief that the problem is that people are unwilling or unable to find jobs, rather than that there are no jobs available. Simply investing that same money in retaining existing jobs, or creating new ones, would give a much better and earlier return on investment than training people how to find jobs which don’t currently exist and the supply of which is being deliberately reduced  by government policy.

Perhaps there is, after all, a discernible strategy here. It is about ideology, not economics. In particular it's about maintaining the fiction that governments must balance the books and that ‘someone’ must suffer to achieve that. Not the hedge fund managers or the bankers, of course, however popular that might be. Public sector workers and people dependent on benefits (to say nothing of people living in the poorest countries of the world as a result of cuts to overseas aid) – these are the ones who will have to pay. And they will be paying largely in order to sustain the fiction that there is no alternative. It’s quite a neat trick when you think about it – they will be paying so that the government can convince them that there is no alternative to them paying. Many of them will indeed be convinced as a result, and will continue to vote for those who are making them pay. The government being blessed with an ‘opposition’ whose main disagreement is over the timescale over which the books must be balanced is just a bonus. Maintaining the budgetary fiction means that the long-term trend for wealth to accumulate in greater and greater sums in fewer and fewer hands will continue; and that, ultimately, is the objective of government policy.