One of the central motivations for austerity was the idea that our deficits and debts were so high as to inspire a lack of confidence in the economy. The narrative was always that we needed austerity to ‘bring the public finances under control’ – even as the government simultaneously cut corporation tax, inheritance tax and income tax for the highest earners. By making sharp public sector cuts, the government would restore confidence and the UK would move towards a swift recovery.
This is from the Progressive Economy Forum.
There are a couple of problems with it.
1) There were no public sector spending cuts. Spending is up in cash terms, in real terms and is still higher in %ge of GDP terms than it was in 2007. What sodding cuts?
2) The stimulative effect is the size of the deficit, not the amount of spending. Cutting taxes to increase the deficit is stimulatory itself.
Not a good evidentiary base to start from, is it?
Simon Wren Lewis has been klnown to insist that even so there has been austerity. His definition being any amount of spending less than the amount which would have entirely prevented the recession.