Forget morality and economics - austerity is just politics

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The Chancellor declared this week that continuing to ‘borrow’ money for extra public spending would be wrong “morally, economically and politically”. Leaving aside the small matter that the government isn’t really ‘borrowing’ money at all, it’s creating new money, and insofar as it owes the extra money to anyone, it owes it to itself, it’s a curious statement to make. He doesn’t seem to have made much effort to elucidate why he thinks it’s immoral, which is probably just as well. Explaining why keeping businesses and households afloat (which is why he has ‘borrowed’ so much money in the first place) is somehow immoral doesn’t look at all straightforward, not least because the corollary is that it is more ‘moral’ to simply allow people to lose their jobs, homes, and lives.

He’s not on much stronger ground when he turns to the economics of the question. His argument that it is economically wrong hinges on the possibility that inflation might rise and that central banks might raise their interest rates in response. Whilst this is a theoretical possibility, it’s completely removed from current economic reality. Introducing a new period of austerity because of a theoretical risk is just about the last thing that the UK economy needs, but it seems that that is where he wants to take us.

But the core of his argument appears to be the political one. He actually said that “I do think that’s important between now and 2024 we’ve got to have a view on what we think the right economic dividing line between us and the opposition”, and “If we think … that debt rising is fine, then there’s not much difference between us and the Labour party. I worry about what that means for us politically down the line.” It amounts to saying that the prime reason for a return to austerity is simply to highlight the distinction between the Conservative Party and the Labour Party; it’s about trying to paint the Labour Party as irresponsible for the Tories’ own electoral ends rather than trying to meet the needs of ordinary people. And the very worst aspect of all of this is that he may even be right. The ‘household analogy’, promoted so vigorously and dishonestly by the Tories and the media, has such a powerful hold that many electors will actually vote for austerity, believing that there is no alternative. It is a fallacy, but it’s a fallacy which even the opposition parties seem reluctant to expose, and which persuades millions to vote directly against their own interests.