Luke Thomas reflects on what the leaders' debate told us about the austerity debate
I have in my hand a piece of paper ...
During last night’s second election debate, David Cameron produced a copy of the now infamous note left for the incoming Coalition administration by Labour’s Liam Byrne in 2010. It was widely circulated online during last night’s debate, and has been repeatedly used in an attempt to discredit the Labour Party’s handling of the economy while in power.
It was politically illiterate of Byrne to write the note, but it is economically illiterate for anyone to believe a word of it was true. Despite this, both Cameron and Clegg used the note as an opportunity to attack Ed Miliband last night for bringing the country close to bankruptcy. This claim is part of that much broader narrative used to justify austerity, but it is totally untrue.
The UK was never close to bankruptcy because there were and are vast sources of money available to the government that are rarely discussed. These include:
1. A Sovereign currency. This means we are able to print our own money when needed, as we did in 2009 when £375bn was made out of thin air by the Bank of England to keep the commercial banks afloat, and try and stimulate the economy.
2. Borrowing. The Tories would have you believe that borrowing is a great evil that must be curtailed at any cost, and it was Labour’s profligacy in borrowing that was in part responsible for the last recession. The truth of the matter is that every government since WWII has borrowed, and the Coalition borrowed more in 4 years than Labour did in 13. Growth hasn’t happened in spite of borrowing, but BECAUSE of borrowing, as the money has been used to fund the sorts of infrastructure and public services that keep a civil society prosperous.
3. Taxation. While tax revenues dropped off during the recession, they weren’t close to drying up. Taxation in the UK is shamefully regressive, with the poorest 10% paying a greater proportion of their income in tax than anyone else. Nevertheless, taxation is a fundamental investment into, and repayment from a prosperous society.
4. Asset sales. Governments own certain things, including buildings, land, banks and organisations. The Coalition has been very ready to offload otherwise profitable assets like Royal Mail and the East Coast Rail franchise for the sake of short-term boosts to the government finances.
While private individuals can borrow like governments can, and sell assets like governments can, we don’t have the right to print our own money, nor can we tax people as we wish. Governments have sources of money not available to private households, and talking about them as though they are entirely the same is another of those unhelpful lies.
... and yet so far.
Last night represented the first time for many millions of people to hear a political message that opposed austerity, from the three female party leaders. Each one was forthright in calling for an end to austerity and quick to condemn austerity policies as wrong. What we missed however was any debate as to WHY the austerity narrative is wrong.
Let me help:
1. Labour didn’t cause the recession. It was caused by unpayable PRIVATE debt in the USA, not public debt in the UK.
2. The country was not near to bankruptcy for the reasons detailed above.
3. The rising deficit was not a special feature of the last recession, but is a common feature of ALL recessions.
4. Austerity slowed economic growth, and easing of austerity was required for growth to pick up again.
5. Spending and investment is needed to stimulate economic growth, not more austerity.
The case for austerity is built not on one lie, but on a wealth of them. These lies have caused suffering and death, and have done untold damage to our society’s fabric. Cameron has nothing to be proud of.