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We can see the effects of austerity when walking down the street [Image: Getty].


Do we? Do we still believe in austerity?

No, we don’t. We never did.

Neither did the Conservative Party. Just look at their “all in it together” rhetoric in the run-up to the 2010 election. You had to be totally ignorant of of current affairs (and economics) to believe that at the time – or a rabid Conservative voter.

Everyone else knew that the plan was to suck investment away from the poor so the rich could have more – and that is what has happened. The rich are now at least twice as rich as they were in 2010. Were they really “all in it together” with us, then? Of course not. The rest of us are much, much poorer than we were in 2010.

Many of us are struggling to survive.

And many of us have died because of Conservative policies. Just because the Tories have denied it doesn’t mean it hasn’t happened.

Unravelling austerity would mean changing the Tory mindset, which isn’t going to happen. So typically, no extra funds are being made available for modest increases in the pay of police and prison officers. The relevant departments have been told that the extra funds must come from within their own budgets for the current year. So something else will have to give.

Meanwhile the austerity that is visible in the street as we walk past rough sleepers continues as “welfare reform” does its dreadful work. Indeed yesterday we learnt that “homelessness in all its forms has significantly increased in recent years”.

As originally conceived, austerity was a response to the financial crisis of 2008. Never forget that this alarming event was purely the result of reckless lending by major banks on both sides of the Atlantic.

The American banks believed they had found a magic money making system. You issued mortgages at high rates to borrowers with poor credit ratings (hence subprime), then bundled these mortgages together, which lowered the risk, and sold these packages in the financial markets for a good price.

Except that when US house prices began to fall, the mortgage securities lost value and the banks began to fear insolvency so they stopped lending to each other and their customers.

Governments’ bailed out their banks, which resulted in a big expansion of public debt. Then a new question arose: were even government loans safe? This is what forced governments to turn to austerity policies.

George Osborne, Chancellor of the Exchequer at the time, stated that the objective was that what is called the structural budget deficit would be in balance in 2015-16. It wasn’t; in fact the deficit is currently running at £50bn or so, a big drop from the £151bn recorded in 2009-2010 immediately following the financial crisis but not zero.

[But] conservatives like to use the alleged dangers of debt and deficits as a club with which to beat the welfare state and justify cuts in benefits.

Read more: The UK is the only country that continues to believe austerity works


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