Monday, 23 November 2020

Skunkflowers and Conservatives


Since Boris Johnson’s party defeated the Conservatives in the last election, the Prime Minister has declared several times that the UK will not be returning to the austerity policies of the wicked Conservatives. He has also repeatedly insisted that there will be no significant tax increases. Meanwhile, his next-door neighbour has been equally insistent that the UK will have to return to a ‘sustainable’ level of debt (something which he is completely unable to define) and ‘repay’ the costs of dealing with the pandemic, and seems to be using that ‘requirement’ to repay debt as his excuse to launch an attack on public sector pay. He argues that this is not austerity at all, which leads to the conclusion that it’s the word that they object to rather than the policy. But a rose would still look and smell like a rose if it were called a skunkflower, as Shakespeare didn’t quite put it.

It certainly is true (and this is one of the excuses used for an attack on public sector pay) that job losses and lost income have impacted the private sector more severely than the public sector during the pandemic, but the consequent suggestion that the solution is to reduce the real income of public sector workers looks more like levelling down than the levelling up which we’re being continually promised. It’s also silly, even in simple economic terms. One of the key factors in ensuring economic recovery in the private sector is to maintain a level of demand in the economy; ensuring that all employees feel equally fearful about their future income levels is counterproductive.

It is also true that the UK’s annual deficit is large and growing, and that is working its way through to what are clearly very high levels of total debt compared to GDP (although the extent of that is somewhat exaggerated by the fall in GDP as a result of the pandemic). But to claim that that must be repaid is to look at only one side of the equation; those to whom the debt is owed are in no great hurry to be repaid and many of them don’t really want to be repaid at all. In the first place, of the approximately £2 trillion total, almost £900 billion of that (approaching half) is owed to the UK Government. Calling it a debt is just an accounting trick perpetrated for political ends. It’s simply not the case that the UK Government is demanding that the UK Government repays this debt urgently, or even at all. And the rest of the debt is what looks to those to whom it is owed like savings or investments, which carry a low level of interest but are entirely secure. If the government insisted on repaying them, what would they do with the money? They’d probably look to reinvest most or all of it, preferably in new government bonds – if not in the UK then elsewhere, hardly something which is going to help economic recovery.

There is no debt crisis, and there is no sign that there will be one any time soon. Politicians who pretend that there is – aided and abetted by the media – are peddling a lie. Controlling public sector wages is based on ideological hostility to the public sector, not on economic necessity. In some ways, Boris Johnson’s new party looks quite a lot like the Conservative Party of old which it replaced, just with more blatantly dishonest spin.

1 comment:

dafis said...

... while committing to spending billions of extra "scarce" loot on all sorts of new defence initiatives including a beefed up navy !. Of course Boris still hums "Britannia rules the waves" as he dreams up yet another policy inconsistent with the previous. If public sector salaries was a real problem why have they agreed a seriously good award for M.P's After all, a government built around "gestures" should have appreciated a bit of sacrifice nearer home.