This is the week that Boris Johnson and Rishi Sunak began softening up doctors, teachers and other public sector workers for a squeeze to their pay and cuts to their departmental budgets. They have done their best to muffle that particular bit of bad news. Instead, aides to the publicity-conscious Mr Sunak briefed journalists on an inflation-busting pay rise for public servants – and on Tuesday got the desired morning headlines. Later that same day, the chancellor admitted it was a one-off for this financial year, and that over the longer run “we must exercise restraint in future public sector pay awards”. Meaning cuts are coming. It had been a crass and short-lived publicity trick: flash the cash in a big show now, then admit it would all be taken back in time. Not only that but, as the Trades Union Congress pointed out, in all the government’s trumpeting of its apparent largesse, little acknowledgement was given that there would be no such increment for jobcentre advisers, local government employees or care workers.
Spin is a hardly a novelty on Downing Street, but the prime minister has developed a new, yet increasingly tiresome, strategy: blurt a falsehood, confess the truth, then hope the furore around the initial fib fixes it all the more firmly in voters’ minds. So Mr Johnson postures as the new Roosevelt, then announces a small spending commitment – but evidently hopes busy and only half-attentive voters will be left with the magic words “new deal”.
He also promises that “we are absolutely not going back to the austerity of 10 years ago”. And yet the Treasury this week warned ministers that this autumn’s comprehensive spending review would be full of “tough choices” (meaning cuts) and that “departments should be identifying opportunities to reprioritise and deliver savings”. The government that went into this pandemic promising to do “whatever it takes” had to be shamed by a footballer into providing meals to hungry children over the school holidays, and has left deep in the red local authorities that stepped up in this historic crisis. Ministers have spent the past few months issuing rhetorical cheques that they must know will never be matched by hard money. It is a deeply dishonest way of doing politics and one of its ultimate results will be to corrode further the trust that voters place in the state. Perhaps that is the objective.
One upshot of the past few days is that autumn’s spending review will probably usher in a round of austerity. Mr Sunak will talk of the huge cost of the pandemic and point to the state of public finances, then lay out plans for cut after spending cut to areas such as local government, perhaps seasoned with just a few tax rises. If he does that, he will be committing economic folly and a huge political gamble.
First, the economics. This month alone, businesses from Harrods to Poundstretcher, Jaguar Land Rover to Accenture have announced job losses. The fear of more to come, along with the uncertainties of dealing with a virus about which scientists still know comparatively little, will prevent businesses from investing and expanding, and will deter households from major spending. In this situation, the state needs to spend money until, as John Maynard Keynes wrote, the private sector recovers its animal spirits. In Germany, the spiritual homeland of austerity, Angela Merkel has grasped this point: her conservative government is vastly outspending the UK this year (as a proportion of national income). So, for that matter, is Donald Trump in the United States. And neither of those two countries is set to end the year by pulling out of a historic trading bloc on terms that are still unclear.
The political gamble of another few years of austerity would be huge. Research shows that those voters hit hardest by George Osborne’s cuts last decade were also those who supported leave in the 2016 referendum. Another round of cuts in an economy as structurally weak as the UK’s would not only diminish Mr Johnson’s fan club, it would make our democracy even more volatile. Labour lost the last austerity wars by not arguing strongly against the cuts. The opposition must not make the same mistake this time.