Ministers demand money in austerity ‘revolt’
Several senior members of the cabinet are calling for higher spending on public services such as health and education. Does this mean an end to the government’s policy of austerity?
It is fair to say that Theresa May probably has not had many relaxing weekends recently, but this week’s Sunday papers will have made particularly awkward reading.
Many of her cabinet ministers were in “revolt”, according to several papers.
Justine Greening, the education secretary, is demanding £1.2 billion for schools. The health secretary, Jeremy Hunt, is reportedly calling for nurses’ pay to be raised and even Damian Green, May’s loyal deputy, has said that tuition fees may have to fall.
Michael Gove, the new environment secretary, joined the chorus on TV, saying that public sector pay could rise.
What do all these demands have in common? They all mean the government spending more money. And the central plank of current government policy is austerity — spending less to shrink the deficit and reduce government debt.
But in the wake of the 2017 election result, which saw Labour make gains by promising to increase spending on public services, senior Conservatives are questioning that policy.
If they needed a reminder, a poll yesterday saw the Conservatives fall 6% behind Labour.
In the wake of the financial crisis of 2008 and resulting recession, government debt and the annual budget deficit increased drastically. Between 2008 and 2010, the deficit went from £9.7 billion to £99.7 billion.
In 2010, David Cameron came to power pledging to reduce the deficit by cutting public spending. When Theresa May became prime minister, she signalled that austerity would continue.
But recently police, health officials and teachers are among those becoming more vocal about the need for urgent spending increases to support their services. Some critics even link the Grenfell fire to cuts to council budgets as a result of austerity.
And some economists say that the policy has failed to produce results — it has stifled growth and government debt is higher now than it was in 2010.
The public mood seems to be shifting too. Last week, a survey found for the first time since 2006 that more people are in favour of increasing taxes and spending than of keeping things as they are.
Is it time to bring an end to austerity?
No, say some. Like a household, we cannot spend more than we earn. We must be responsible with the public finances. Once people realise increased spending will have to be funded by increased taxes on themselves, it might not be so popular.
Yes, say others. Services are crying out for investment and the public have had enough of being told they have to tighten their belts. Austerity has not produced the results we were promised. Besides, the economy does not work like a household. We need to invest in services in order to fuel economic growth.
- Should the government borrow money to invest in public services like the NHS?
- If you were prime minister and you had to choose one, which of the ministers’ demands would you fund?
- Appoint a class prime minister and divide the rest of the class into government departments (health, education etc). Hold a cabinet meeting where each department argues for funding. How will the PM divide their £1 billion budget?
- Research how the USA reacted to the 2008 financial crisis and write a report comparing it to the UK’s reaction. Which was better?
Some People Say...
“Austerity punishes the poor for the mistakes of the rich.”
What do you think?
Q & A
- What do we know?
- Since 2010, the annual deficit has fallen, but government debt has not. Ministers have had to extend the expected length of their proposed austerity programmes several times. The Conservatives’ poor performance at the general election means that her ministers feel able to speak out against Theresa May’s policies.
- What do we not know?
- What things would look like if the UK had not had austerity. Some people say the UK could have ended up like Greece, while others say it would be growing faster, like the USA.
- The ministers speaking out against austerity could also be doing so to covertly mark themselves out as potential leadership candidates to succeed May.
- The annual deficit is the amount the government spends minus the amount it collects from taxes and other income each year.
- Government debt
- This is the total amount of debt the government has accrued. It is often expressed as a percentage of gross domestic product.
- Carried out by Opinium for The Observer. It also found that May’s approval rating had sunk to -20%, down from +21% when the election was called.
- Financial crisis
- The global crash of 2008 was the worst since the 1930s. It meant that extra money was borrowed to prevent banks from collapsing while the amount raised in taxes fell due to reduced economic output.
- Prominent critics include Nobel prize-winner Paul Krugman, and David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee.