October 22, 2017

The inequality of austerity

The Barnett formula is deeply unfair to the English regions, writes Peter Divey.

Austerity is the real deal in Greece. Since 2009, GDP has fallen by 26 per cent and debt is 180 per cent of GDP. Cutting public spending to reduce debt accumulation is now folly as there is no meat left on the austerity bone. Some public pensions have been cut by 60 per cent and 40 per cent is the norm. But it has been needed to ensure continued financial bail-outs and now the money lenders want even more. Finance is being given to enable interest payments, the capital is not being paid down. Whenever a swathe of interest is due there is a big European and international fuss. The IMF acknowledges that Greece urgently needs significant debt restructuring. Write-offs not just write-downs. The EU, principally Germany, is opposed. Greece must be seen to be doing even more they say. If it ever was any financing now is not a legitimate loan. Keep paying the interest, keep kicking the can down the road, it is what the EU does.

Cuts and austerity of this magnitude in the UK would cause social armageddon. In comparison, UK austerity is barely noticeable. But there are UK winners and losers even so. The Treasury publishes a yearly analysis of public spending and there are big differences across countries and regions of the UK.

Public spend per head in £ Region Public spend per head in %
10,983 Northern Ireland 121
10,536 Scotland 116
9,996 Wales 110
8,816 England 97

If you exclude London, England generally fares poorly. Here is the regional analysis.

Public spend per head in £ Region Public spend per head in %
10,129 London 112
9,472 North East 104
9,387 North West 103
9,076 UK average 100
8,791 Yorkshire 96
8,750 West Midlands 95
8,361 South West 92
8,237 East Midlands 91
8,163 East 90
7,977 South East 88

I think the bottom four English regions have every right to be angry. These are the citizens who are deprived for the winners. They are the real losers in this austerity war. The difference between the South East and Northern Ireland is offensive. How is it justified? To raise £7,977 up to £10,983 would take an outrageous 38 per cent increase.

Only a cynic would say that these large over-payments are a bribe to counter devolution. Money to reinforce the geo-political integrity of the UK. A balm to soothe the rumblings of the Scottish Parliament, and if you pay one you must pay the others. I am that cynic. The Barnett Formula is unfair to the English taxpayer. The new DUP support and confidence pact has cost a billion quid which will only exaggerate this skewed spending bias. Those poorest supported English regions can only dream of such generosity so easily and quickly given.

I admit to a Nicola Sturgeon intolerance. Constant mithering has worn me down but she has been quieter lately following the GE mauling. Indy-ref 2 has been temporarily parked and Ms Sturgeon’s energies are now directed towards scuppering Brexit and irritating the Tory govt. These figures starkly show the generosity of English wealth redistribution at a cost to its own regions and populace. Economic reality was a powerful undermining influence that eroded desire for another referendum attempt and English subsidies were a big part of that.

The “Northern Powerhouse” has become a rallying cry for some, a recognition that life exists beyond London, but using these official figures it is apparent that other regions of England are more needy. Look further south, east and west, not just north. MPs are aware of this long standing situation, the public is not. Norfolk, Cornwall, Lincolnshire, Devon, Essex, Leicestershire and others, you are being short changed. There are pockets of deprivation in every part of England but the quiet market town is struggling, the village and rural hinterland who do not make a fuss are easy to ignore. Austerity is necessary but I see no reason why it should not be fair. How can Scotland afford free prescriptions and free university tuition? Now we know. The Treasury has decided to slow its progress towards reducing public spend to less than 40 per cent of GDP because of austerity “fatigue”. Hammond is seemingly content with borrowing ten million per hour. England will continue to do all the heavy lifting, but some regions more than others. It is not Greek-style armageddon but a little English rebellion would not go amiss.

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Peter Divey

Peter Divey’s dormant interest in British and American politics has been reawakened by last year’s Brexit referendum result and Trump’s ascendency to the White House. In his spare time he enjoys playing chess and has a growing collection of vintage wrist watches.

  • noix

    Every time I see the word ‘austerity’ I wonder whether the meaning is understood in the same way I do, that is that the income for the government is greater than the spending and the national debt is being reduced. Nowadays the ‘right’ seems to have accepted the left wing idea that reducing the rate at which we are piling debt onto our children and grandchildren is ‘austerity’.

  • Fourmyle of Ceres

    how spending £50 BILLION more than we receive in taxes is “austerity” is beyond me

    so lets see real austerity please

  • Great Briton

    I live in Yorkshire. I’m not angry that Yorkshire gets slightly less than other regions. I’m angry that after years of “austerity” we are still borrowing obscene amounts of money because the government is unable to say No! to all the outstretched hands.
    Apart from all the obvious dubious causes such as overseas aid, I still cannot understand why we are paying taxes to give money to charities who then lobby the government to spend even more.
    Poor old Theresa May, so scared of being called the Nasty Party that she keeps on borrowing

  • obbo12

    In shock news rich areas get less money due to having lower unemployment and not qualifying for means tested benefits. London’s public spending increase above the average is largely due to transport costs, this spending in turn allows the south east’s wealth creation. This kind of playing to the gallery nonsense is what I that expect from Corbyn and cronies. Go play the outrage game somewhere else

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