United Kingdom government austerity programme

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The United Kingdom government austerity programme is a fiscal policy undertaken in response to the Great Recession. It is a deficit reduction programme consisting of sustained reductions in public spending, intended to reduce the government budget deficit and the welfare state in the United Kingdom. The National Health Service[1] and education[2] have been "ringfenced" and protected from direct spending cuts.[3] United Kingdom austerity policies have received pointed criticism from left-wing politicians and economists, and have prompted anti-austerity movements among citizens more generally.[4]

History[edit]

Following the financial crisis of 2007–2008 a period of economic recession began in the UK. In 2009, the term "age of austerity" was popularized by British Conservative leader David Cameron in his keynote speech to the Conservative Party forum in Cheltenham on 26 April 2009, in which he committed to end years of what he characterized excessive government spending.[5][6] The austerity programme was initiated in 2010 by the Conservative and Liberal Democrat coalition government. Its original stated goal was to, "achieve [a] cyclically-adjusted current balance by the end of the rolling, five-year forecast period". At the June 2010 budget, the end of the forecast period was 2015–16.

Between 2010 and 2013, the Coalition Government said that it had reduced public spending by £14.3bn compared with 2009-10.[7] However, in a speech in 2013 David Cameron indicated that his government had no intention of increasing public spending once the structural deficit had been eliminated and proposed that the public spending reduction be made permanent.[8] In 2014 the Treasury extended the proposed austerity period until at least 2018.[9] By 2016 the Chancellor George Osborne was aiming to deliver a budget surplus by 2020, but following the result of the United Kingdom European Union membership referendum, 2016, he expressed the opinion that this goal was no longer achievable.[10]

Osborne's successor as Chancellor, Philip Hammond, retained the aim of a balanced budget[11] but abandoned plans to eliminate the deficit by 2020.[12] In Hammond's first Autumn statement in 2016 there was no mention of austerity, and some commentators concluded that the austerity program had ended.[13][14] However, in February 2017 Hammond proposed departmental budget reductions of up to 6% for the year 2019-20,[7] and Hammond's 2017 budget continued government policies of freezing working-age benefits.[15] The Conservative Party manifesto for the 2017 general election pledged to eliminate the deficit by the "middle of the next decade",[16] an aim which the Institute for Fiscal Studies said would "likely require more spending cuts or tax rises even beyond the end of the next parliament".[17] Following the election, Hammond confirmed in a speech at Mansion House that the austerity programme would be continued.[18]

Effects[edit]

Demographics[edit]

In 2016 research from the Women’s Budget Group and the Runnymede Trust indicated that women, people of colour and in particular women of colour have been affected most by austerity, and that they will continue to be affected disproportionately until 2020. This is due to the fact that black and Asian women are more likely to be employed in the public sector, be in low-paid jobs and insecure work, and experience higher levels of unemployment than other groups.[19]

Food banks[edit]

Researchers have linked budget cuts and sanctions against benefit claimants to increasing use of food banks. In a twelve-month period from 2014 - 2015, over one million people in the United Kingdom had used a food bank, representing a '19% year-on-year increase in food bank use'.[20]

A study published in the British Medical Journal in 2015 found that each one percentage point increase in the rate of Jobseeker's Allowance claimants sanctioned was associated with a 0.09 percentage point rise in food bank use.[21] However, the Organisation for Economic Co-operation and Development found that people answering yes to the question "Have there been times in the past 12 months when you did not have enough money to buy food that you or your family needed?" decreased from 9.8% in 2007 to 8.1% in 2012,[22] leading some to say that the rise was due to both more awareness of food banks, and the government allowing Jobcentres to refer people to food banks when they were hungry, in contrast to previous governments.[23]

Health services[edit]

In 2016, figures analysed by the King's Fund think tank showed that 'mental health trusts in England are still having their budgets cut, despite government assurances they would be funded on a par with physical healthcare'. The analysis 'suggests 40% of the 58 trusts saw budgets cut in 2015-16'.[24]

A 2016 report authored by the NatCen Social Research for UNISON shows that LGBT people have suffered from a lack of access to mental health services as a result of austerity.[25]

In 2017, the Royal Society of Medicine said that government austerity decisions in health and social care were likely to have resulted in 30,000 deaths in England and Wales in 2015.[26][27]

Housing[edit]

When the coalition government came to power in 2010, capital investment in new affordable homes was cut by 60%, while government-imposed caps on local authority borrowing continued to restrict their ability to raise money to build new homes.[28] Writing in Inside Housing, former housing minister John Healey observed that rate of starting social rented schemes had declined from 40,000 in 2009/10 to less than 1,000 in 2015/16.[29] The number of people sleeping rough on any one night across England had more than doubled between 2010 and 2016 to an estimated 4,134, according to a government street count.[30]

The benefit cap, introduced via the Welfare Reform Act 2012, set a maximum level for the amount of state welfare benefits that could be paid to an individual household in any one year. The measure came into effect in 2013 with the figure initially set at £26,000 per year, close to the average income of a family in the UK at that time. The anticipated reduction in government expenditure as a result of the measure was £225 million by April 2015.[31] The benefit cap initially affected approximately 12,000 households, mainly in high-rent areas of the UK such as London, but in 2016/17 the limit was reduced to £20,000 per annum (£23,000 in London) extending its effects to around 116,000 households across the UK.[32]

A Local Housing Allowance (LHA) policy restricting Housing Benefit for private sector tenants to cover a maximum number of rooms had been in place since 2008. It was extended in April 2013 to cover public housing in the United Kingdom (except Northern Ireland). The resulting under-occupancy penalty, commonly known as the "bedroom tax", affected an estimated 660,000 working age social housing tenants in the UK, reducing weekly incomes by £12–£22.[33] The measure reduced the expenditure of the Department for Work and Pensions by approximately £500 million per year.[34]

From April 2016 the LHA rates used to calculate maximum housing benefit levels for private sector tenants were frozen for four years. Research by the housing charity Shelter indicated that the proportion of such tenants likely to experience a shortfall in housing benefit was 80%, amounting to 300,000 families. The degree of shortfall depends on dwelling, location and individual circumstances, but Shelter expected that by 2020 the shortfall could in some cases reach hundreds of pound a month.[35]

In April 2017, housing benefit payments were ended for new claims made by people aged 18–21. Research by Heriot-Watt University found that the policy would reduce annual government expenditure by £3.3 million pounds.[36]

Social security[edit]

From 2013 onwards, working-age social security payments were limited to a maximum annual increase of 1% instead of being increased annually according to the rate of inflation. The policy of suspending the social security payments of unemployed claimants who were judged not to be adequately seeking work was continued, and the frequency and severity of the sanctions was increased.[37] From 2016 a four-year freeze on all working-age social security payments was introduced. It was anticipated that it would affect 11 million UK families and reduce expenditure by £9 billion, a figure later increased to £13 billion.[38] The Welfare Reform and Work Act 2016 abolished the Work-Related Activity Component of Employment and Support Allowance for new claimants from April 2017. This reduced the weekly social security payments for the disabled people affected by £29.05 a week (at 2017/18 rates). The reduction in government expenditure was initially forecast to be £640 million per annum by 2020/21, though this was later revised to £450 million.[39]

Criticism[edit]

The rationale behind the need for achieving a balanced budget in the financial climate following the Great Recession has been questioned by some Keynesian economists. Andrew Gamble writing in Parliamentary Affairs in 2015 commented:[40]

Most macroeconomists now agree that the austerity programme pursued by the Coalition Government in its first two years was both too severe and unnecessary and set back the economic recovery which was underway in the first half of 2010. The Office of Budget Responsibility confirmed that the austerity programme reduced GDP, while the Oxford economist Simon Wren-Lewis has calculated that the Coalition Government's austerity programme cost the average household £4000 over the lifetime of the Parliament and severely damaged those public services which were not ring-fenced.

Ha-Joon Chang, writing in 2017, observed that "in today’s UK economy, whose underlying stagnation has been masked only by the release of excess liquidity on an oceanic scale, some deficit spending may be good – necessary, even".[41]

The austerity programme has faced opposition from disability rights groups for disproportionately affecting disabled people. The under-occupancy penalty (commonly known as the "bedroom tax") is an austerity measure that has attracted particular criticism. This reduces the amount of housing benefit available for those living in a house with a bedroom that the Government believes they do not need, with activists claiming that two-thirds of council houses affected by the policy are occupied with a person with a disability.[42]

Some have argued that austerity measures in the UK are fueling a growing gap between the old and the young which seems likely to undermine inter-generational fairness. Some have even gone as far as to comment that this is deliberate, part of a wider campaign to residualise the welfare state so that it mainly rewards people for paid work, particularly through the contributory state pension, while undermining the social safety net for people of working age.[43]

Feminist Fightback's "Cuts Are a Feminist Issue" featured in Issue 49 of Soundings Journal (published online in 2011 by the New Left Project) described the particular gendered impact of the austerity programme and "how the government's cutbacks in social provision are privatising work that is crucial to the sustenance of life".[44] In 2012, the Fawcett Society published "The Impact of Austerity on Women" which, in particular, criticised the Treasury for not collecting "sufficient data and analysis of the impact of either the raft of individual measures that have been announced in key budget statements since June 2010, nor on the cumulative impact of these measures on women’s equality across the board".[45] A briefing from the UK Women’s Budget Group on the cumulative distributional effects of cuts in public spending and tax changes on household income by gendered types over the period 2010-20 identified significant, and disproportionate, negative impacts of the government’s plans on women and low-income households (in which women predominate) despite claims that the burden would be shared equally.[46]

Ring-fenced departments[edit]

Peter Dominiczak (political editor at The Daily Telegraph) wrote that because spending on the NHS and foreign aid is ring-fenced, "other Whitehall departments will face savage cuts to their budgets".[47] However, some (such as Dr Louise Marshall in The Guardian) have questioned whether the National Health Service (NHS) really is exempt from austerity measures.[48]

Effects on general elections[edit]

The United Kingdom general election, 2015 was won by the Conservative Party. Anti-austerity protests followed the result[49], but post-election polling for an independent review conducted by Campaign Company for Labour MP Jon Cruddas indicated that voters in England and Wales did not support an anti-austerity platform, concluding: "the Tories did not win despite austerity, but because of it".[50]

In the United Kingdom general election, 2017 the Conservative Party lost their overall majority but remained in government as the largest single party in parliament. Gavin Barwell, Theresa May's Downing Street Chief of Staff, blamed anger over Brexit and austerity for the loss of seats.[51] The Labour Party opposition announced their plan to challenge further austerity measures and vote against them in the House of Commons. A Labour spokesman said: “We will be using the changed parliamentary arithmetic to drive home the fact that the Tory programme for five more years of austerity will not go on as before”.[52]

See also[edit]

References[edit]

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  2. ^ "School spending stays protected from budget cuts". BBC News. 26 June 2013. 
  3. ^ "Should NHS budget be ring-fenced?". BBC News. 1 May 2013. Retrieved 3 September 2016. 
  4. ^ Krugman, Paul. "The Austerity Delusion". The Guardian. Retrieved 2 May 2016. 
  5. ^ Deborah Summers (26 April 2009). "David Cameron warns of 'new age of austerity'". The Guardian. . Archived from the original on 29 April 2009. Retrieved 26 April 2009. 
  6. ^ M. Nicolas Firzli & Vincent Bazi. "Infrastructure Investments in an Age of Austerity : The Pension and Sovereign Funds Perspective". Revue Analyse Financière, volume 41 (Q4 2011 ed.). Retrieved 30 July 2011. 
  7. ^ a b Rob Merrick (28 February 2017). "Chancellor Philip Hammond accused of more 'failed austerity' after demanding extra spending cuts before the election". The Independent. 
  8. ^ Nicholas Watt (12 November 2013). "David Cameron makes leaner state a permanent goal". The Guardian. 
  9. ^ James Kirkup (5 Jan 2014). "George Osborne to cut taxes by extending austerity and creating smaller state". Retrieved 1 February 2014. 
  10. ^ Peter S. Goodman (7 October 2016). "Europe May Finally End Its Painful Embrace of Austerity". New York Times. Retrieved 17 October 2016. 
  11. ^ Peter Walker; Rowena Mason (3 October 2016). "Philip Hammond to ditch George Osborne's economic targets". The Guardian. Retrieved 18 October 2016. 
  12. ^ Michael Wilkinson (3 October 2016). "Philip Hammond warns Britain's economy heading for post-Brexit 'rollercoaster' ride as he drops pledge for budget surplus by 2020". The Telegraph. Retrieved 18 October 2016. 
  13. ^ Will Chalk (24 November 2016). "Whatever happened to austerity?". BBC Newsbeat. Retrieved 28 November 2016. 
  14. ^ Christopher Hood; Rozana Himaz (27 November 2016). "How does austerity look in retrospect? The UK’s recent fiscal squeeze in historical perspective". The London School of Economics and Political Science. Retrieved 28 November 2016. 
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  17. ^ Edward Malnick (26 May 2017). "Tory plan to balance budget by mid-2020s 'could require tax rises'". The Telegraph. 
  18. ^ George Parker; Gavin Jackson (20 June 2017). "Philip Hammond insists he will stick with austerity". Financial Times. 
  19. ^ Maya Goodfellow (28 November 2016). "A toxic concoction means women of colour are hit hardest by austerity". The Guardian. 
  20. ^ Food bank use tops million mark over the past year. The Guardian. Published 22 April 2015. Retrieved 20 May 2017.
  21. ^ Loopstra, Rachel (2015). "Austerity, sanctions, and the rise of food banks in the UK" (PDF). BMJ. 350: 2. doi:10.1136/bmj.h1775. Retrieved 25 June 2015. 
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  27. ^ Hannah Summers (18 February 2017). "Tony Blair's Brexit speech 'not helpful', says Jeremy Corbyn". The Guardian. 
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  30. ^ Natalie Bloomer (13 February 2017). "2017: The year the full effects of austerity are felt". politics.co.uk. 
  31. ^ "'Thousands' hit by government benefit cap now in work". BBC News. 6 February 2014. 
  32. ^ Patrick Butler (1 November 2016). "Benefit cap will hit 116,000 of poorest families, say experts". The Guardian. 
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  35. ^ Patrick Butler (10 September 2015). "Low-income families in private housing face large benefit shortfalls". The Guardian. 
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  38. ^ Ashley Cowburn (1 April 2017). "Spending freeze to cut extra £4bn from benefits as raft of new benefit cuts kick in". The Independent. 
  39. ^ Abolition of the ESA Work-Related Activity Component (Report). House of Commons Library (Briefing paper). 7 March 2017. 
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  42. ^ Ryan, Frances (16 July 2013). "'Bedroom tax' puts added burden on disabled people". Retrieved 25 June 2015. 
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