A decade since austerity: A political choice that mustn’t be made again

Ben Lake MP, our Treasury Spokesperson writes how the political choice of austerity should never be repeated, a decade after it was introduced by the Conservatives in Westminster. 

Ten years ago today, amidst another global crisis a fresh-faced Chancellor stood at the dispatch box and launched the Conservative’s programme of austerity.  Even as history seemingly repeats itself today, Wales must make it clear to the UK Government that we cannot suffer a further round of austerity.

Austerity, at the time considered “unavoidable” by the Westminster consensus, slashed the budgets of public services, curtailed investment in the economy, and helped usher in a hollow low-wage, low-growth economy.

Statistics from the Office of Budgetary Responsibility, the UK Government’s public finance watchdog, are damning about the effectiveness of austerity: not only would a strategy of growth, rather than cuts, have led to better public finances, it could have reduced the national debt by 6%.

It is difficult not to conclude that opting for a policy of austerity represented a rash, ideological response to the crisis as opposed to economic necessity. Given the incredible human cost of this decision, we mustn’t let the immediacy of the current challenge cloud our long-term thinking as we respond to this crisis. 

After all, the human cost of Covid-19 has been largely borne by those who were punished most by austerity, with mortality rates twice the national average in our poorest communities. There is a clear need for Westminster to closely consider the consequences of its economic policies, and the lives cut short across the UK. 

Yet even as we reflect upon this human cost, it is far from certain that the current Conservative UK Government has learnt the lessons of a decade of austerity. In light of recent announcements and decisions, can we have confidence that the UK Government will pursue a pragmatic - rather than an ideological - approach to ‘project rebuild’?

Its record to date is far from reassuring. In pursuit of headlines the Government trumpets trade deals that promise comparatively modest benefits to the economy, whilst stubbornly refusing to countenance an extension to trade talks with our closest, and biggest trading partner.

The warning signs are there, and unfortunately Wales is in an even weaker position this time round. Heading into the Covid-19 crisis, Wales’ population was unhealthier, its workforce declining and its economy treading water. Already politically marginalised in an unequal Union, last month Westminster started the process of cutting Welsh representation in the Commons by nearly a quarter, which would further diminish our political voice.

Undoubtedly, the economic damage of Covid-19 is deeply worrying. With unemployment rising at the same time as reported job vacancies and investment are decreasing, it is impossible to escape the seriousness of the situation. Yet we must not lose sight of the fact that our economy was already faltering before the crisis. Many of the problems of the pre-crisis economy: poor productivity, rising national debt, the worst regional inequality in Europe, and declining life opportunities have merely been exacerbated by the crisis.

However, there are glimmers of hope for Wales. In their response to the crisis many Welsh institutions have demonstrated an ability and willingness to innovate that offers a tantalising glimpse to an even greater potential if they were given the freedom to assume an even wider range of responsibilities.

As the only Welsh party to have voted consistently against economic austerity, Plaid Cymru is arguing that we should not retreat to a business as usual approach as we tackle the economic aspects of this global crisis. Instead, we should be moving forward by ensuring that Welsh businesses are supported through the tail-end of the health crisis, and a programme of sustained investment in skills training, R&D, and infrastructure should be initiated so as to bolster the enduring strengths of the economy, whilst also allowing us to take advantage of new opportunities.

Specifically, such aims could be achieved if the UK Chancellor extended support to businesses and workers in sectors such as hospitality, tourism and aerospace to prevent mass unemployment, protect our rural areas and the strength of the wider Welsh manufacturing supply chain.

In addition to this, the crisis has exposed the fiscal limits of the current devolution settlement, and in particular how inflexible it is when faced with such a significant economic shock. If it truly wants Wales to become a prosperous nation within the UK, the Westminster Government should give Wales the fiscal and borrowing tools we need if we are to adapt to the post-Covid world.

Crucially, after months of collective sacrifice by communities across the UK, the Chancellor must rule out any return to austerity. Instead, a sustained and ambitious programme of central-government investment to decarbonise the economy and reposition it for the 21^st century should be undertaken immediately. Focussing attention on the long-marginalised nations and regions of the UK would help boost productivity, provide long-term employment opportunities, and offer much-needed hope to our younger generations that Wales can offer them an exciting and prosperous future.

There is no escaping the tragedy this crisis, but we do have a chance to ensure that we emerge from this collective struggle with a stronger, more sustainable, and more inclusive economy and society. Ruling out a return to Westminster imposed austerity is the first step to building a better future for Wales.