The AUSTERITY myth

This is the 6th part of the "Leftie Serie" which I created after attending the People & Planet Conference on the 8th of March 2014. 
Here are links to the other posts: Feminist Economics, Inequality, Financial Crisis, Layoffs vs. Bonuses, Defending the 1%

Austerity in Britain. If you open a newspaper, watch the news or talk to people you'll regularly find one statement; The UK Government is imposing austerity measures on the economy, and all kinds of notions of what effect these cuts have to the lives of regular people. Since 2010, the Government's explicit target has been to reduce Public Deficit, impose cuts to public spending and, essentially, lead an austerity-based revolution in the UK. Sure enough.

Regardless of whether you approve of austerity as a measure or not, we have to find out if that is actually the case. After all, austerity doesn't happen because the Government SAYS so, or explicitly wants it to occur. It also has to act accordingly, and the desired effect can't be offset by other factors, in order for us to actually talk about austerity. That is: if you cut £10bn from one department and increase the spending of another department by £20bn you are not imposing austerity, regardless of your rhetoric. You're simply re-arranging funds.

For instance, my constant opponent these days, Lefties and organisations such as People & Planet, makes three claims which I intend to look into:

1) The welfare State is under attack
2) Inequality is on the rise
3) Worker's rights are being eroded

As for #2, I've shown several times how the idea is misleading and that the statement in itself is incorrect. I won't deal with worker's rights just yet, but will focus on the alleged attacks on the Welfare State. Is the Welfare State under attack? Is Austerity being imposed in the UK?

Austerity, the argument goes, means the government is slashing Public Spending, removing benefits for the poor, increase taxes and reduce funds for health care. Sounds scary and quite bad. Now, let's see if that's the case.

PUBLIC SPENDING

This chart shows total Public Spending in the UK from 2001 until 2012. Beyond that (the red staples) are figures for projected spending (what they hope to achieve). Government spending has been continuously increasing.

= No sign of austerity here.

But that doesn't take Inflation into account, so let's go with real terms:

In real terms, Government Spending in the UK has virtually doubled since the late 80s. Almost regardless of government, the trend is undeniable; increased government spending. If we focus on the last few years and the accusation of austerity, there's a slight downturn in 2011, itself smaller than the increase after 2008 financial crisis. Generally, during recessions government spending hikes because of increased benefit payments/redistributions when more people are unemployed etc. That is, should the UK government have changed nothing, the curve over the last few years would look something like that above; an initial big hike in response to recession, than slowly reduced as more people get back into work and unemployment comes down. If austerity would have been imposed, the drop would have been significantly larger than what the chart tells us.

= No sign of austerity here. 

But, if we take the economy as a whole into account. What happens? How large a part of the UK economy is represented by the Government Spending?

Yet again we have a projection made by the Treasury (the last 5 staples). Let's ignore that, and have a look at actual reported numbers. Last accessible; 2011-2012, which shows a little over 45% of GDP consisted of Government Spending. As in the previous section, we see a hike during the recession (2008-2010), and a gradual reduction. Also, the current level is substantially above the levels for the last 15 years. 

(Note: a "reduction" here is not necessarily a reduction; if the economy grows and spending stays the same, the percentage would be falling and the chart would look something like above.)

All of this is consistent with the news that the UK Economy is growing again, which means Government Spending as a % of GDP is gradually decreasing. 

= No sign of austerity here

WELFARE STATE UNDER ATTACK?

Ok, so what about the Welfare State? What about the alleged cuts to the NHS?

Financing the NHS has been a great political discussion since it was created. And guess what? Throughout these 65 years (time for retirement anytime soon?) the claims have been consistently the same; NHS lacks funds; NHS needs more money!

As seen, UK has never spent as much money on the NHS as it currently does. Also, the percentage of national income that we allocate to the NHS is way above previous levels.

Here's a more detailed view for actual spending over the last decade or so:

Clearly, rapidly increasing spending for Health care or NHS. 

= No sign of Austerity here.

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Bottom Line: Austerity has not been imposed in the UK, despite the explicit target and attempts by the Government. 

That means the entire discussion about austerity occurs in a theoretical framework, that is, for economists, philosophers or historians to argue about whether it can work or whether it has worked in the past. 

What we see today is not austerity. It's a government that wants to impose austerity measures, but is unable/fails to do so.

Next time someone refers to the "Austerity in the UK", you know they have no clue. Let's stop rely entirely on what people say about something and more about what they actually do - or what's actually going on.

Austerity in the UK is a myth.