Where British finance ministers used to announce their future plans for tax and spending in an annual budget, this year has been a real roller coaster ride:

• March saw a traditional spring statement with forecasts for government borrowing and national debt for the coming five years;
• May saw a cost-of-living package to help families cope with rocketing energy prices that followed Russian President Vladimir Putin’s attack on Ukraine;
• Early September saw a second package to help both businesses and families by capping energy bills;
• Late September saw a so-called Liz Truss growth plan for big but unfunded tax cuts, and therefore big increases in borrowing and debt: a “mini budget” that had to be dropped in October because of collapsing confidence in UK economic policy on the financial markets, a sinking pound and a rapidly rising cost of government borrowing and interest rates; and
• Mid-November saw Jeremy Hunt’s autumn economic statement/budget aimed at stabilising the Tory government chaos by lowering government borrowing by £62-billion or 2.1% of GDP in 2027-28 and causing Britain’s national debt-to-GDP ratio to fall at the end of the forecasting horizon.

In other words, a return to “austerity” for UK economic policy.

“Austerity” originally described Britain’s economic policy in the years straight after World War 2. It meant restraint, with consumer spending held down to limit UK imports and boost Britain’s balance of foreign trade. UK national debt stood at nearly 250% of GDP then, so money was tight and tax rates were high. Almost everything was in short supply, so there wasn’t much to buy in the shops anyway until economic growth sped up in the 1950s.

“Austerity” came back into common usage in 2010 with the budgetary policies adopted by Britain’s Conservative-led governments and pursued for a decade: savage public spending cuts, squeezing the UK economy tighter than any of the advanced economies.

Visit Daily Maverick’s home page for more news, analysis and investigations

The cuts amounted to more than 7% of the GDP. Or £180-billion in today’s terms, almost as much as England spends on health and social care each year. The November autumn statement plans further public spending cuts building up to £31-billion in 2027-28 and an equal amount in tax increases.

On top of nearly a decade of public spending cuts, the independent think-tanks the Institute for Fiscal Studies and the Resolution Foundation both question the credibility of these plans and therefore the chances of balancing the public finances in five years’ time.

The Tory government has met none of its borrowing or debt targets since taking office 12 years ago. Miserably slow economic growth is the reason. 

The economy is now expected to grow significantly slower over the coming five years than expected in March 2022, due in part to September’s damaging “mini budget”. Government borrowing is forecast to be higher.

In consequence, the debt-to-GDP ratio will be 18% of GDP or £420-billion higher at the forecast horizon in five years’ time than was expected in March.

Jagjit Chadha, the director of the independent think-tank the National Institute of Economic and Social Research (Niesr) put the November budget/autumn statement into the context of three recent economic shocks from Brexit, Covid and the current energy price boom: “This is now the third shock we have experienced in the last six years that has materially downgraded our growth prospects and productivity performance … There is nothing really about growth in the budget.” 

Britain’s economic prospects for the near future look particularly poor. Official forecasts expect real living standards to fall by 7% in the next two years.

Britain is the only G7 economy whose GDP is still below its pre-pandemic 2019 level and the economy is heading into recession. With current Tory policies, Britain’s GDP is not forecast to regain its pre-pandemic level until late 2024.

All over Britain choirs are rehearsing their Christmas carols. Best to include in their repertoire “In the Bleak Midwinter”. That’s what lies ahead.

South Africans are not alone in being gloomy, sharing with the Brits governments that have for well over 10 years inflicted on their people regular doses of national self-harm. DM

Lord Hain’s new thriller, set in South Africa, is The Elephant Conspiracy, published soon by Jonathan Ball.