Need is not a percentage of GDP – and Labour has to say so

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Martin Wolf has one of his regular, and insightful, comment columns in the Financial Times this morning. It is entitled “Britain’s experiment in austerity“. If I might summarise his arguments, firstly he says that it is extraordinary that Britain is trying to reduce its government spending and deficit so rapidly when it has no fiscal crisis.

Secondly, he says it is entirely a political choice that the level of public spending in this country is to fall from its long-term average of about 43% to around 41%.

And thirdly, as he points out, given that there has been a massive one-off loss of GDP growth in this country, which is now assumed will never be recovered, this cut in spending as a proportion of GDP is a very real reduction because that GDP is much lower than anyone could have reasonably anticipated. He illustrates the point with graphs, the most important of which is that at bottom left here: it shows how stark the loss in GDP is and how it will not recover the lost ground.


This, I admit got me thinking whilst doing the school run this morning, and it occurred to me that inherent in these stark conclusions is the whole fallacy that underpins the ConDem policy.

As I have already noted today, business is wash with cash. We know that the rich are getting richer. We know that bankers are, to be not too subtle, winning hands down. And we know that the gain that they are making is occurring despite a relative decline in our economy – after all, that upward line GDP may be wholly optimistic. it is the government’s forecast and there is no certainty that it will be delivered. What we can be sure of though is that the stake of some inside this reduced pot is increasing, but that those who are seeing an increase in their command of resources are those who have least need for additional resource, because they are already the wealthiest in our community.

On the other hand boost with least resources in our communities are suffering a double blow. Firstly, with GDP stagnant, with unemployment rising, and with the prospect of any form of social advance through economic growth removed from them, all their hope has been removed. Worse than that, with GDP stagnant, and their share of that total GDP falling, which must be the case if others have their share increasing, they are seeing a relative decline in well-being. And, at the same time given that so many of these people are desperately in need of the re-allocation of resources that can only take place through the state if it is willing to command a significant proportion of GDP, which this government is denying is its role, then they’re already reduced stake in a stagnant GDP is reduced even further by pinning the scale of government service to a fixed and declining percentage of that already stagnant GDP. it is not just charts as a consequence that public services are being reduced, or that it is the poorest who will suffer most. This is the inevitable consequence of this policy of reducing spending as a proportion of GDP when GDP itself is behaving in a way that we really are not familiar with.

Let’s put this another way. there are some absolute needs that must be met the person is to have a decent standard of living. They must be able to eat nutritiously. They must be clothed. They must be housed. They must have access to power, transport, education, social facilities, social intercourse, work, training, and, by necessity, the income to participate in these activities. These are not relative issues, these are absolute needs in a modern society. Relative needs relates to all the fripperies of life advertised in Sunday newspapers, holidays away from home, access to cars if one lives in a city ( but not the country), and so much more that we all enjoy, but can candidly live without. The choice the government has made is that the absolute needs of some will not be met whilst the relative needs of some will be maintained, and even enhanced for a limited number of people.

I stress, that is a choice. It is deliberate. Given the decisions that have been made it is an inevitable consequence that those with fixed need, and little consumption over which they have discretion must suffer most in this current economic environment.

There are many things to campaign about at the moment – and I’m delighted that people are campaigning on many issues from tax, to forestry, to the NHS and more. But this issue of the deliberate creation of poverty within our country is, surely, at least as important. And it says that the issue cannot be dealt with by single issue campaigning alone. This is about politics. There is a need for a serious challenge to neoliberalism within our political system. Labour has to provide that now.