You’ve Never Had It So Bad
Jeremy Hunt’s Autumn Statement is set to plunge British living standards into a steep and sudden fall. Families will see their spending power drop by 7% in two years, as double-digit inflation combines with higher taxes to make them poorer.
That won’t just wipe out all the wage growth of the past decade: it will take the rest of the 2020s for the average family to get back to where it was in 2019, on the eve of the pandemic (see below, right). The Daily Record’s headline, reversing Harold Macmillan’s famous phrase in the 1950s, says it all: You’ve Never Had It So Bad.
The irony is, it could have been worse. The logic of freemarket economics says: when in trouble, shrink the state. And there are indeed real-terms spending cuts for all departments except health, social care and education in Hunt’s plans.
But the Sunak-Hunt government is realised the danger of the fiscal doom loop and stepped back. They might still achieve the dreaded rinse-repeat cycle of recession-deficit-spending cuts — but it’s clear they’re aware of the dangers. By borrowing more over the next two years, and by seriously relaxing their own fiscal rules to allow debt to rise until 2027, they’re trying to engineer a weak, deflationary recovery in the mid-decade.
Technically debt is supposed to start falling after five years. Technically there should be harsh spending cuts after 2024. But the Tories know they won’t be around after 2024 so the whole Statement has to be read as a final admission of defeat for neoliberal austerity.
That’s the economics. But what does it mean for politics?
Conservatism at a dead end
Since Johnson’s administration collapsed due to corruption and incompetence, I’ve been convinced we’re at the end of a long socio-political cycle. All forms of neoliberal conservatism have been tried: Cameron tried Europeanism plus austerity; May tried soft Brexit plus mild austerity; Johnson tried hard Brexit plus the big state; Truss tried hard Brexit plus the small state; now…