Thanks David Cameron, We're Really Looking Forward to Permanent Austerity
David Cameron outdid himself on Monday night. Stepping up from a golden chair to a golden lectern in his brightest white bow tie, the prime minister announced another new era of austerity.
As yet, it's unclear how Team Cameron managed to score such a spectacular own goal. This was a Bullingdon boy standing in one of the most opulent banquet halls in the country, telling his public that he hopes to make austerity permanent. With his bread machine confession a recent memory, you'd be forgiven for thinking the whole thing was just a surreal attempt to troll the left-leaning media. Unfortunately, what we were actually witnessing was an ill-timed test run of the Tory argument for yet more cuts – a move they hope to implement if they win the 2015 elections, and one that will leave us feeling the bite of austerity for decades to come.
Until this week's speech, the government had maintained that they had no choice but to use austerity to reduce the deficit. The cuts weren't about "some ideological zeal" or personal or party preference, they said, largely laying the blame on the shitty state of affairs their predecessors had left them in.
And yes, maybe we did need to reduce spending. But why was the UK so focused on balancing the books through cuts rather than tax increases? And why did their plans just happen to read like the secret manifesto that's been hidden away in the dreams of Tory top brass since the 1980s?
Behind his golden lectern at the Lord Mayor's Banquet, comforted by three quarters of positive growth and safe in the company of hundreds of rich white people, Cameron was free to set out his vision: "But that doesn’t just mean making difficult decisions on public spending," he said. "It also means something more profound. It means building a leaner, more efficient state. We need to do more with less. Not just now, but permanently."
So maybe the bedroom tax, the public sector job cuts and the benefit cap weren't just about reducing the deficit; austerity wasn’t the only choice available. All of that, it would seem, was actually about building a profound new Tory state – a sort of rickety capitalist fun fair with no safety nets.
I asked James Meadway, senior economist at the New Economics Institute, what he thought of Cameron’s admission about austerity. "There was never any credible, purely economic argument for austerity," he said. "And there was always that suspicion that what you’re looking at here is not an issue of economic management – about how we can make the economy run better – but a question of how we can make the economy run differently. I was surprised that he would say it, [though]. It's the classic thing that you don’t say these things, you just do them."
Cameron’s speech makes George Osborne’s smug September announcement sound like George Bush making a victory speech just months after invading Iraq. Osborne talked about "tentative signs of a balanced, broad based and sustainable recovery", and it smelt like the sweet scent of victory. The plan had taken longer than they had thought it would, but we were finally getting there (or at least we’d get there sooner or later).
Instead, we found out on Monday evening that we’re at the beginning of a brutal, drawn out campaign where the Tories use the recession as an excuse to permanently remould the state. And it’s a dream they’ve had for a long time. Earlier in the year, Norman Tebbit said the biggest thing the Thatcher government he served under failed to get to grips with was reforming welfare and education. Now, the party has a chance to address both.
While the benefit system is being dismantled, those in work face a long-term squeeze in living standards as pay rises fail to match the increasing costs of living. The real value of your wages has been falling since the start of 2008, and it isn’t going to start getting better until at least 2016. After that, there could be another 14-year hangover with 1950s-like growth in consumer spending, according to accountancy firm PwC. Part of the reason is that housing and energy bills now account for about a quarter of our spending, up from just over 20 percent before the financial crisis. By 2030, this could rise to around a third, putting sustained pressure on the nation’s quality of life.
Meadway sums it up: "You’re talking about a nine to ten percent fall in average real earnings over the last four or five years. Most of that’s since 2010, when the coalition got in. This is the biggest decline in living standards since the 1870s – you have to go back generations before you find something on this scale."
This is where Labour leader Ed Miliband has gone on the offence, highlighting the cost of living issue and calling for a freeze on energy bills, which he claims would save enough taxpayer money to pay for thousands of teachers and nurses. Miliband’s strategy has worked because it sounds like it makes sense and Cameron’s been on the back foot for weeks.
On Monday, the prime minister told the crowd of dignitaries, "There are some people who seem to think that the way you reduce the cost of living in this country is for the state to spend more and more taxpayers’ money." He’s trying to re-angle Miliband's speech about the aggressive pricing behaviour of energy firms so it looks like he was arguing for lowering taxes. It doesn’t make sense and the rebuttal won’t work.
If Osborne’s speech in November was a scene setting exercise – "the economy’s recovering, austerity works" – then Cameron’s took that argument further on Monday. Not only was austerity the right response to the recession, he suggested, but we need more of it and we need to make the cuts permanent. It’s just amazing that, in the face of all this discussion about the brutal social effects of austerity, he decided to use that stage to do it.
Follow Chris on Twitter: @MediaSpank
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