7 - No Time for Austerity Now

Summary

The chapter begins by detailing the massive economic support packages announced as the first COVID-19 lockdown was imposed and the accompanying promise to provide the NHS with ‘whatever it takes’. It shows how Conservative small-state ideology was jettisoned and a ‘magic money tree’ found that pushed up the annual budget deficit from £55 to £355 billion, 17 per cent of GDP. It will suggest that, in the light of this, people might question how necessary the preceding years of austerity had been, arguing that austerity in fact lowered economic growth, failed to pay down any of the massive debt from the financial crash and was based on flawed analysis.It will strongly refute the idea that the unprecedented costs of the lockdown must now be ‘paid for’ and the reckoning must come soon. Using detailed historical comparisons and arguments about the peculiar opportunity that negative real interest rates provide, it shows that we can accommodate a rise in the national debt without yet more austerity cuts to public services. The costs of the pandemic response can and should be treated in the same way that the one-off costs of war were in the past – paid off over the long term.