This chart comes from the paper I have written with Ronen Palan and published by City University Political Economy Research Centre:
The data sources are HM Treasury budgets from 2000 onwards and the OBR forecast in July.
The chart was designed to impart quite a lot of information, all of it stated on a per capita basis in constant prices to show the impact of government actions at a macro level on individuals in the UK and how they are forecast to change.
This data suggests to me that there will be considerable 'austerity stress' as a result of the government's plans to implement the OBR forecasts, the details of which will be fleshed out tomorrow. Let me run through what those stresses will be.
First, and most obviously, government income per head of population is forecast to rise dramatically. From £10,020 in 2014/15 to £11,470 a head in 2020/21, this is a 14.5% increase over the period. Almost all of this is forecast to come from above inflation growth in income tax and national insurance. Corporation tax will fall, and VAT will be broadly neutral. I stress, I have also checked the data against forecast GDP growth: that shows the same trends. The result is that a lot of people are going to have to be paying a lot more tax to make this plan work. That means there are going to be a lot of quite stressed people in the UK paying record levels of tax per head, on average.
Second, at the time this is happening government spending per head will be falling. The particular issue here is to be found in the green and purple lines in the middle of the graph. These represent the two major components of government spend. The green line is technically called RDEL, which is the spend allocated by government to departments like health, education, law and order, defence, transport and so on. This is planned spending and is all the stuff that government does that makes us feel good.
The purple line is AME - or annually managed expenditure. This covers what the government calls welfare, debt interest and other spends that it thinks are largely beyond its control and which arise because of the economic circumstances of the time.
What is important is the different trends in the trajectories of these two sets of data. RDEL - the feel good stuff - rose under the Labour government - and was paid for by tax increases that covered current spending (near enough) but no investment (broadly speaking) until 2008. AME also rose under Labour but not by nearly so much: the economy did not demand it.
Then the banks crashed in 2008 and the trends change.
From 2009 onwards RDEL falls per head and AME rises. The fall in RDEL is from £5,860 per head in 2007/08 to £4,430 in 2019/20 in constant prices. That's a decline of 24.5%. In the same period AME will rise from £4,270 per head to £5,630 a head, and increase of almost 32%. Importantly, they swap positions: AME will considerably exceed RDEL. We are moving from a planned government to a reactive government.
This is important. The populace has been taught to hate AME. And it does. But the trend remains upward, nonetheless. At the same time, taxes will be increasing and the government feel-good factor will be vapourising as planned spending on all the things we want disappears.
Does this matter? I think so, for several reasons.
First, the expected tax increases are not talked about. I presume they come from expected growth, with a belief that yields will rise by more than that growth as the nation's army of self employed finally become aggregate tax payers. I do not see that happening. That is one of the principle reasons why I think this plan will fail: austerity cannot deliver a balanced budget for Osborne because come what may cuts reduce GDP by more than the reduction in government spending (i.e. the fiscal multiplier is more than 1) and Osborne has always, and incorrectly, and without evidence base assumed otherwise. This plan is doomed from the outset then because the growth that, I think, underpins this assumed growth in tax income is simply not going to arise.
But as that realisation dawns - as month after month and year after year deficit reduction targets are not met (as they were not in October and will not be this year) - the real stress of seeing cherished public services disappear will increase. And at the same time stress about welfare, interest and other budgets will rise and yet more draconian cuts in benefits will be proposed in an effort to make books balance.
The result will be a massive austerity stress. The government will feel it as panic creeps through its ranks: failure this time can only be George Osborne's fault and powerful men struggling for political survival are not good for the country.
Worse though, the stress will be felt right across the UK. And that will be evidenced in increasing social disruption. Doctors on strike and the need for the Lords to rebel against constitutional niceties are just the first signs of this: stress as services are reduced to scales that we know are unnecessary and which are way below the level we know that we as a society can afford to deliver will result in backlash, especially as more tax is expected, whilst stress around social security and the well being of those who need such payments will rise, considerably.
There will be attempts to direct some of that stress into conflict within society, I suspect. That would suit the government's purpose. But I think ultimately that will be unsustainable because it will become apparent that austerity is simply not delivering. At some point over the next two or three years stress will reach the point where backlash against a government failing because of austerity will grow considerably.
I just hope opposition parties have something useful to say at the time, because if not the vacuum, will become very nasty indeed.
Welcome to austerity stress. And begin to get used to it. It is going to be a part of life.
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I wonder if awareness of how nasty things will get is why Cameron’s preparing us for troops on the street? Is martial law imminent in some form or other? I wouldn’t be at all surprised…
Governments certainly seem to be reacting hysterically to the bombing in Paris. A useful excuse perhaps. It was horrific, but 100% successful due to governments subsequent reaction to ensure terror is instilled in us all.
Am I suffering from amnesia- but it surely was never like this during IRA bombing campaigns.
I lived in London in that era
And no, it was not like this
The difference might be that there weren’t, in any practical sense, either billions not political capital to be made from carpet-bombing Ireland.
Maybe you were looking in the wrong places: London didn’t panic, but you might not have noticed the sectarian commentary in the media.
You won’t have noticed clicks on the line and signs that your post had been tampered with – you’re not Irish and politically active, nor were you a trade unionist in the 1970’s and 80’s – and, like almost everyone else in mainland Britain, you were trying very hard indeed not to notice ‘internment’ – street roundups and imprisonment without trial based on religious affinity. That’s the sort of thing that goes on in ‘those countries’.
And, back in the good old days, people could be assassinated on British soil, if you had the right sort of friends with the right sort of Loyalty – none of this cowardly business of shipping them off in the night to prisons in some faraway nowhere-stan.
As if it ever mattered that somebody would notice.
What’s new is the scale of the resources available. And, perhaps, the frightening effectiveness of propaganda: maybe you should talk to someone with a visible disability about the change in attitudes, and how unsafe it feels today.
In short, there is nothing new today: but there is something larger and far better-coirdinated.
No you aren’t suffering amnesia AliB. There was no where near this much hysteria and official advantage taking following Birmingham, Guildford, the M62 coach etc. Members of the Government and the opposition, who should know better (Dan Jarvis et al), were not queuing up in the TV studios and self styled “progressive” media like the Guardian to argue for the bombing of Belfast or Derry/Londonderry, with the obvious civilian deaths such stupidity would entail.
Doubtless there will be some who would caricature Bill’s comment (above) as hysteria in its own right. Which would be funny if it were not for clear cut examples of counter productive activity taking place which would add weight to such an argument.
The level of proposed and planned surveillance being a case in point. Alex over at the Yorkshire Ranter explains the (seemingly) official stupidity of the publicly stated rationale for the data grab here:
harrowell.org.uk/blog/2015/11/21/4974
where the real world reality of data overload ensuing from mass surveillance and data collection results in outcomes in which terrorists who are defined as people who want to blow things up and slaughter civilians become needles in a sea of data hay. The only reasonable explanation is to ditch the official rationale, (‘we need these powers to find terrorists who blow things up and slaughter civilians’) and try to identify a more plausible reason, because those pursuing this line did not get where they are today by being stupid.
One explanation, following the evidence that power corrupts and will take any advantage it can, is that a more flexible definition of “terrorism” and “terrorist” is in play or will at some point come into play. One in which the distinction between dissident in word and deed, civil opposition to official policy, protest, and civil disobedience etc and terrorism become less sharp and more blurred over time.
It would certainly have been a more rational and sane policy not to waste resources of trained personnel by infiltrating, spying and fathering children (yet more collateral damage) on civil groups involved in environmental activism, miscarriages of justice, incompetent police investigations and so on. Not to mention the time and resources spent providing names of trade unionists to put on blacklists. Those resources would have best been used to find real terrorists who want to blow things up and slaughter people. The fact that such a misuse of resources has gone on so long and continues reveals a great deal about the reality of the official mindset when it comes to such sharp distinctions.
The impacts of the austerity agenda are but one aspect of wider trends being pushed and managed into play. Perhaps those deserving of the most consideration are those who continue to psycologically invest in the status quo because it will be amongst these people where the shock will be greatest when the reality hits them.
I tend to agree with Dave H- the crenellation of neo-liberalism/austerity/terrorism/surveillance are not without linkage. The global/supra-state nature of globalisation/neo-liberalism are all part of the Gordian knot.
For all that has been said on this point there are significant differences between the two conflicts.
The Irish conflict was a continuous, very domestic affair, complex intractable and real. The Islamic terrorism threat is global (external) and in many ways contrived (on all sides).
The Islamist threat provides a pretext for political grandstanding. The official response to the IRA bombings may not have been as heavy-handed but you’re looking at a situation there where the presence of MI5, special branches etc. had become insidious and ubiquitous. Infiltration and intrigues were such that the security agencies and the paramilitaries had become virtually one and the same.
For a good insight into that subject I recommend Paul Foot’s 1989 book “Who Framed Colin Wallace” Its long and detailed (perhaps too much so) but I can guarantee that it will leave a lasting impression.
http://www.scribd.com/doc/249527132/Who-Framed-Colin-Wallace-by-Paul-Foot#scribd
Brilliant. Thank you
Does this matter? I think so, for several reasons.
So do I. What it means to me is that you no longer, in the literal sense, actually have government, meaning any real control of the situation. If the engine runs too fast there is no regulator valve to bring it back into levels of safe tolerance. Ultimately it will break.
I can’t believe that those in power don’t know this at some level-they kno where the power resided and that the stress will be felt by the weakest and those most easily suppressed.
This morning in the Grauniad:
“However, Osborne is likely be criticised for raiding other parts of the Department of Health’s budget on Wednesday, and especially for forcing trainee nurses to take out student loans in future, as he has decided to phase out publicly funded nursing bursaries. ”
With regard to the labyrinthine nature of Governm Accounts-the Labyrinth has its own logig as Bill Mitchell reminds us:
“Governments create a complex accounting web to hide the intrinsic characteristics that define their currency-issuing status. These voluntary creations have little economic purpose but do serve to engage politicians in the games they play about debt ceilings, ‘disastrous’ deficits, and all the rest of the lunacy that ignorance breeds.
These labyrinthic accounting trails are quite often time-consuming to work out but they all have the same intent — they make it look as though the central bank is in some way divorced from the treasury functions, that tax revenue ‘funds’ government spending and that funds raised from debt-issuance funds government spending beyond the tax revenue.
All this is convenient for those who wish to maintain the myth that taxpayers fund government spending and are therefore being robbed when the government spends its money.”
As for the hope that there will be an opposition in a fit state to oppose this, I would doubt it. Corbyn has about 20 MP’s with the rest being austerian and Tory-Lite, worst of all there is not even a homoeopathic hint of any challenge to the shitty memes that the Tories trot out.
Taking into account that the “government ” cannot be that stupid to follow this absurd course, then this economic strategy is entirely planned. The success of this plan being ironic, giving the fact the perpetrators (obviously not the actual “planners”) couldn’t find their own backside with either hand.
Since unexpectedly winning the general election, and with a sizeable majority, the Conservative Party seems to be unable to stop hitting itself with the ‘stupid stick’.
David Cameron seems to be intent on leading his lemmings in a headlong rush towards the cliff edge, taking the rest of the country with him.
John Costello
Activist for ‘We Are Shadows’
AliB “It was horrific, but 100% successful due to governments subsequent reaction to ensure terror is instilled in us all.”
I agree, there was no panic in London or anywhere else with the IRA, but there was at least the assurance that the perpetrators of the atrocities were not actively seeking death. That is a regrettable difference, though still not one for which panic is necessary.
But terror has a long tradition on the Continent. Belgium was invaded by the French after the revolution and has a long history of an identity problem both before and since. The colonial links between France and North Africa are deep and very troubled – we forget that Algeria became independant only in 1962 .
But the Socialist government of France should still be ashamed of themselves. Apart from one born in Belgium, these murdering terrorists were born in France and seem to have had a background mostly in drug dealing. Rather as, I imagine, not many of the IRA were Church Attending God Fearing Catholics, at least two of the terrorists seem never even to have set foot in a mosque. They did though come from areas where there is 40% unemployment – probably higher amoungst the young – and areas where, what little policing there is, is always paramilitary. In 2014 there was are an average of 9 French policeman per day wounded by gunshots. And Hollande says he is at war with ISIS.
He needs to engage with a proper domestic policy rather than playing the world strategist. And Britain needs to realise that, whilst of course it should sympathise with the innocent dead in Paris, it should not be playing to the gallery like the Police and Crime Commissioner in Surrey who said that, outside London, British Police would be faced with a massacre.
Rather like the heavily armed police in Paris then.
The events in Paris are not an argument for bombing anywhere in the Middle East but an argument for decent Neighbourhood Policing. That seems to be what Osborne wants to cut and that will mean one more plus for the drug dealers and the terrorists.
Depressingly, that’s even more austerity stress.
Excellent post.
Everyone from Krugman to Soros and anyone who knows anything has recognised that austerity reduces GDP(with multiplier)that it increases welfare costs and reduces tax receipts.
What you have done has taken the general idea, quantified and illustrated it. That extra step is quite important.
Well done.
Doez “Welfare” include pensions, as seems to be the trend?
It would be interesting to see state pensions, public sector pensions, out of work benefits and in-work benefits disaggregated.
yes
It could very well be that we are entering a perfect storm: the cuts will begin to genuinely harm more people and there could be reprisals; the blowback from our involvement in bombing Syria will in my view bring the frontline right to people’s doorsteps for obvious reasons.
The (CR)ISIS crisis will no doubt be used as a Trojan horse to further curtail our ability to object and build up momentum against this most draconian of administrations.
Time for another song? How about ‘Long Time Gone’ by Crosby Stills & Nash. It could have been written just after the last election:
https://www.youtube.com/watch?v=ucXMMoZ0Wd0
Here’s the lyrics:
“Long Time Gone”
It’s been a long time comin’
It’s goin’ to be a long time gone
And it appears to be a long
Appears to be a long
Appears to be a long time
Yes, a long, long, long, long time before the dawn
Turn turn any corner
Hear you must hear what the people say
You know there’s something that’s goin’ on around here
The surely, surely, surely won’t stand the light of day, no
And it appears to be a long
Appears to be a long, mmm
Appears to be a long time
Such a long, long time before the dawn
Speak out you got to speak out against the madness
You got to speak your mind if you dare
But don’t, no don’t, no, try to get yourself elected
If you do you had better cut your hair, mmm
And it appears to be a long
Appears to be a long, mmm
Appears to be a long time
Such a long, long, long, long time before the dawn
It’s been a long time comin’ (Long time comin’)
It’s goin’ to be a long time gone (Long time gone)
But you know
The darkest hour
Is always, always just before the dawn
And it appears to be a long
Appears to be a long
Appears to be a long time
Such a long, long, long, long time before the dawn
How do today’s announcements change this graph? The welfare line will be pretty much the same but won’t departmental spending and tax revenue be at least a few hundred pounds higher per person?