Abandoning Austerity Wouldn’t Increase Wages

Boris, Jeremy Hunt, Justine Greening and other MPs flirting with Torbynism should read today’s Centre for Policy Studies report ‘Abandoning Austerity is No Solution‘.

Ireland’s significantly larger fiscal consolidation has seen it experience a larger fall in its deficit, a larger proportionate fall in unemployment and better wage growth than the UK, counteracting the narrative that a higher level of austerity leads to economically harmful outcomes. If only Osborne had been as radical as his Irish opposite number Michael Noonan. Osborne excused his lack of radicalism on the deficit on the grounds he was in a coalition and “had to get re-elected”. Fine Gael were also in a coalition and got re-elected… 

This is reflected across other OECD countries that had a large budget deficit in 2010. There is a strong correlation between those countries that cut spending by a higher degree, and countries which achieved better economic growth and better wage growth.

As the CPS says:

“Even John Maynard Keynes argued that austerity should be used at the top of the business cycle, and it is vital that the UK’s budget deficit continues on a downward trajectory… In fact, the UK’s budget deficit reduction programme is already very modest and the UK’s tax burden is already set to climb to its highest level in four decades by 2025.”

The report finds that the only responsible ways to increase public sector wages would be to re-gear spending priorities, for example by making savings in the international aid budget or ring-fenced pensioner benefits. It also suggests further extending regional pay structures (apart from London weightings, there are no other areas of England where huge differentials in cost of living are matched by pay). Take note Torbynistas…




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