Austerity - who will pick up the pieces?

I've written before that I don't see how the likes of Corbyn, Sturgeon et al can "end austerity" when government spending has actually increased over the period they are wittering on about (Why we can't end austerity 2 June 2017). Nicholas Macpherson has spoken up to confirm that. Who is Nick? He was permanent secretary at the Treasury under 3 chancellors, Brown, Darling and Osborne. Referring to Corbyn's remark that people have had enough of austerity he noted that Osborne's trick was to talk tough while putting in place a programme that was "admirably pragmatic and flexible". In other words keeping the spending taps open. So, while Ireland managed to reduce gross public debt from 86% of national income to 75% between 2010 and 2016, Britain's public debt went from 76% to 89% over the same period. "In short, Britain never experienced austerity" says Nick.

I'm glad Nick agrees with me (er, that phrase sounds a bit familiar?) but David Smith has pointed out why we are both, after a fashion, wrong. It's not about the actual numbers, it's all semantics, of course.

According to Smith, Osborne thought about making real cuts in spending*. In the run up to the 2010 election he was considering 20% across the board cuts, like Canada had implemented, but coalition government made that impossible. (For better or worse? Certainly less traumatic in the early years but as a result we are deeper in debt going into another set of tricky waters. One for future historians to debate, I suspect).

So, while Osborne didn't actually make real net cuts in spending, what Smith goes on to explain to numbskulls like me is that, when people talk about seven years of "austerity" the word doesn't have its normal meaning. While the Cambridge dictionary says it means "a difficult economic situation caused by the government reducing the amount of money it spends", Smith says that it has come to mean any or all of deficit reduction (i.e. borrowing a lot but not quite as much as had once been foolishly planned), falling wages in real terms, rock bottom interest rates or even "the fact that a Grenfell Tower tragedy could happen in the 21st Century" . One can understand people wanting to see rising real terms wages, interest rates on savings that exceed inflation and public sector spending increasing in real terms. Wouldn't we all? But Smith says he has heard "some strange contributions in recent days from people purporting to be economists". Smith concludes that the problem with Osborne's gradual approach (which I actually think was the right approach in the circumstances prevailing at the time) is that it necessarily takes a long time. Many of the things people are tired of cannot be changed at the drop of a hat. As an example, although some hawks on the Bank's Monetary Policy Committee have started voting for an interest rate rise, it will be a long slow haul before anything like 'normality' returns. So he concludes that "however you define it, austerity has further to run".

Though maybe not so much in Northern Ireland, given the DUP's position of strength. The province already benefits from public spending that is £5437 a head more than taxes raised there. Now it's only right and proper that less affluent areas of tge country are subsidised by the rest. But the Northern Ireland subsidy is already nearly twice the figure for Scotland (£2824), when even the Spectator says that Scotland's deal is unfair on England and called for the Barnett formula to be reviewed**. But the DUP want to tone down austerity. I think they actually mean "pump up the volume". Wouldn't we all like to have a fairy godmother?

Nevertheless, I am reminded of Humpty Dumpty, for whom a word "means just what I choose it to mean". And we all know what happened to Humpty.

*Austerity has further to run, however you define it, Sunday Times 18 June 2017
**Yes, Scotland does receive an unfair share of public spending. Probably. Alex Massie, The Spectator 11 March 2015. Public sector spending in Scotland is 116% of the UK average, in Northern Ireland 124% and in Wales 110% (says the BBC, Treasury: soending in Wales is 110% of UK average 22 November 2013) which is why the Welsh government doesn't want tax raising powers before a review of Barnett.