Austerity has cut UK GDP growth by almost £100bn, new report says

Think tank said pursuit of spending cuts to reduce the deficit had proved a ‘false economy’ as it resulted in reduced tax receipts to the Treasury

A decade of austerity has hit GDP growth by a total of just over £3,600 per household, a new report has claimed.

Analysts at the New Economics Foundation separated out the effects of government tax-and-spend decisions from official figures produced by the Office for Budget Responsibility.

They found that the impact of policy in this area was to reduce GDP every year since 2010, suppressing its level by a total of £99.4bn in 2018-19 and a predicted £117bn by 2022-23.

However, the Treasury insisted the government was pursuing a “balanced approach to restoring the public finances”, saying that the 18.3 per cent growth in the economy since 2010 was better than seen in countries like France, Italy and Japan.

The think tank also said that reduced government spending had forced households to increase their own borrowing.

And it said the pursuit of spending cuts to reduce the deficit had proved a “false economy” as it resulted in reduced tax receipts to the Treasury, contributing to numerous missed borrowing targets since 2010.

NEF head of economics Alfie Stirling said: “At this time of year there is often renewed speculation over whether the chancellor will meet his year-end deficit targets by March.

“But for nine years, the elephant in the room has largely been missed: the sheer scale of economic damage that these targets have contributed to in the first place.

“The human impacts have always been clearly visible for all to see, from rising homelessness to longer A&E waiting times.

“But now we can also get closer than ever before to measuring the impact on the economy as a whole, and using calculations that have even been rubber-stamped by the government themselves.

“The big picture here is that the livelihoods of people and communities have been made more bleak as a direct consequence of active government decisions.

“This should not be allowed to happen again.”

Shadow chancellor John McDonnell said: “Austerity has torn apart the fabric of our society, and this new work by NEF shows just how damaging its impact has been over nine years.

“With each household deprived of more than £3,600 in this year alone, we can see just how much austerity has wasted the potential for growth and wounded us all as a community.”

And TUC general secretary Frances O’Grady said: “The government promised the age of austerity is over, but cuts are continuing to have a devastating impact on communities across the UK.

“When you slash vital public services that help people get on in life, you are holding them back. And by cutting investment to communities, you restrain economic growth and wages.”

A Treasury spokesman said: “Since 2010 the economy has grown 18.3 per cent, which is faster than France, Italy and Japan.

“We are taking a balanced approach to restoring the public finances – getting debt falling while investing in our vital public services and keeping taxes low.

“We’re increasing the national living wage, we’ve frozen fuel duty, and we’re cutting taxes for 32 million people to help families meet the everyday cost of living and keep more of what they earn.”

PA