PEF publishes a new report – The Macroeconomics of Austerity, written by PEF council members Jo Michell, Rob Calvert Jump, and James Meadway with research by Natassia Nascimento.
The report has been profiled in the Guardian by Larry Elliot “Tory austerity ‘has cost UK half a trillion pounds of public spending since 2010’ “
Research author, economist, Dr Robert Calvert Jump, said
Austerity was never a necessity, but a poor economic choice whose effects are now all too apparent. A return to spending cuts in the wake of theCovid-19 pandemicwould inflict a similar, dramatic cost on an economy that has barely recovered from the last round of cuts.
Dr Jo Michell said
We have found no evidence for the claims made by governments implementing spending cuts that austerity would support economic recovery after the financial crisis. Instead of promoting growth by boosting economic confidence, this research shows that the programme undermined wages and conditions at work, and cost public services hundreds of billions of pounds.
NOTES:
1. “The Macroeconomics of Austerity” by Robert Calvert Jump, Jo Michell, JamesMeadway and Natassia Nascimento is published by the Progressive EconomyForum (PEF), and available for download at:
https://progressiveeconomyforum.com/the-macroeconomics-of-austerity
2 The paper uses official data from the Office for Budget Responsibility (OBR) to show a counterfactual “balanced budget” expansion of public spending over 2010-19, relative to the cuts that actually occurred. A “balanced budget” expansion of publics pending means that additional spending is matched by tax revenues, which are raised from a combination of maintaining the 2010 tax status quo, without the major Coalition cuts, and from economic growth over 2010-19.
3 The paper demonstrates that a growthrateof 3% a year in public spending would have allowed £540bn of additional spending over 2010-19,and still reduced debt to GDP by 3 percentage points bythe end of 2019 relative to what was actually achieved.
4 The paper finds that there is no evidence that the improved economic confidenceclaimed for “expansionary austerity” operated during the post-2010 austerity period.Instead, the effects of austerity operated through the labour market in the form oflower wages and worse conditions. The indirect effects of this were severe andhighly unequal: the costs fell overwhelmingly on women and the lower paid. Theresearch calls thisexploitative austerity.
5,. These adverse impacts from austerity were occurring even before the shock of the 2016 EU referendum and subsequent Brexit deal with the European Union.