Rejoice! “Austerity is over,” shouts the front page of The Times this morning. Apparently the Prime Minister administered the last rites at the 1922 Committee last night.
So has the Magic Money Tree suddenly started blossoming with cash? The same report suggests not:
“When it comes to matching Labour’s spending promises, Mrs May’s room for manoeuvre is limited. Philip Hammond, the chancellor, had already softened the Tories’ deficit reduction programme by pushing back the deadline for balancing the budget to 2025. It was also revealed last night that he faces a £7.5 billion black hole in his existing plans because finance measures postponed until after the election may not clear a hung parliament.”
Austerity may have existed in the dreary rhetoric of the General Election campaign. But it does not exist in reality so far as the Government is concerned. This financial year the state is due to borrow another £58 billion. Public spending is due to rise to £802 billion – up from £773 billion in the financial year 2016/17. We live in an age not of state austerity, but of profligacy. An era of incontinent spending by our politicians. If austerity – in terms of factual reality rather than political messaging – was ever alive, it surely died before last night.
On the other hand, austerity has been all too genuine for millions of families with squeezed household budgets. Growth in pay has remained sluggish – even relative to low inflation.
Yet politicians seem to only consider easing austerity in terms of the money they spend for us. The Times report adds:
“Restrictions on corporation tax relief, estimated to bring in £4 billion over four years, the “making tax digital” programme to save £2.2 billion and scrapping permanent non-domicile status to bring in £1.4 billion will need to be passed to make his figures add up.”
But we are already taxed to the hilt. Taxes on business and the rich might be popular as immediate announcements but they compound the fundamental problem by harming the economy. They are even self-defeating as a mechanism to increase state spending as tax revenues fall rather than rise as a result of such meddling.
What is needed is to apply Conservative policies – to reduce state spending and cut tax. This should certainly include budgeting in some tax cuts for when we no longer make payments to the EU budget. Vote Leave proposed allocating £2 billion of savings from our membership sub to scrapping VAT on gas and electricity bills. That should be accepted by the Government.
But that will not be enough to secure a change to a low tax, enterprise economy with strong growth and higher wages. The question is not about ending the spending cuts – they haven’t taken place when spending is measured overall. It is about starting them. But doing so not with a tone of hairshirt miserablism but of freedom and optimism – of trusting and rewarding people to spend more of their own money.
Some may murmur that such notions might be attractive to free market ideologues but that any spending cuts would be politically unacceptable. What about opinion polls? What about the fragile Parliamentary arithmetic?
It depends where the axe falls. I offered some proposals which the Government absent-mindedly has yet to implement. Would trimming some of the £28 billion spent each year on Quangos really cause a public outcry?
Would it really bring great dismay if the Government got serious about selling more of the vast portfolio of surplus public sector land? The move would assist spending reduction because by reducing borrowing it would ease the burden of debt interest. Remember that interest bills are a huge spending item for the Government – around £50 billion a year according to the Office for Budget Responsibility. Sales of state land could potentially bring in receipts of hundreds of billions – dwarfing the proceeds of past privatisation. It would also bring about a dramatic increase in the housing supply.
It is time for austerity to end for the British people. That means austerity needs to start for the British state.