Government starts austerity drive

In: Uncategorized

23 May 2010

The British edition of this week’s Financial Times leads on a call from David Laws, the chief secretary to the Treasury, a new age of austerity in the public finances.

His statement marks a significant shift as it is the first time the government has spoken openly in such terms. Laws, a Liberal Democrat, will be in charge of implementing savage spending cuts., the Financial Times website, includes a transcript of the interview (registration required). Among the key passages:

David Laws: we are now moving from an age of plenty to an age of austerity in the public finances. We will make that austerity as progressive as we can by protecting the things and the people who need protecting. But we are moving to that age of austerity and no department should be spending money on projects which would have looked good in the years of plenty but which would just not look like priorities in the period that we’re entering into. And it also would be ridiculous for departments to be spending huge amounts of money on pilot schemes for projects that are just never going to be affordable.

FT: It’s interesting to hear you talk about the age of austerity – a phrase that didn’t cross any Tory lips during the campaign.

David Laws: Well, it was actually, Nick Clegg, I think spoke about progressive austerity at the conference last year. I’ve never been too sure whether he was being polite that austerity will progress forever or, but what he meant by it, I think, was that there will be tough decisions to make on public spending.

But actually we also want to make that from the perspective of being a progressive party and a progressive government. And in all of the decisions that we take on public sector pay, on pensions, no spending, on the welfare budget, both the chancellor and I are determined to be looking at the impact of those on people who are the most vulnerable members of society. And we’ve got to make sure that those people are protected as far as they reasonably can be from the tough action that’s going to have to be taken. And some of the things that we managed to agree in the coalition document will help in that because we agreed that the priority on tax, essentially the overriding priority will be the delivery of a higher personal allowance which will help people on lower incomes and those on middle incomes. So, but we will need to look at the same issues when we come to pay, when we come to pensions and everything. And all of this work is already being rapidly commissioned because the earlier we can make decisions on all of these matters, the easier it will be to secure the fiscal consolidation that’s going to be necessary, particularly that we make on 2011 and onwards.”

Laws is right to argue that Nick Clegg, the Liberal Democrat leader, was arguing for austerity in 2009 (see 26 April 2009 post). But all the main parties would only hint at it during the election campaign.

The £6 billion of cuts being announced tomorrow, which apply to this financial year, are only a hint of what is to come. Things are going to get nasty for ordinary people living in Britain.