Toggle high contrast
Chancellor Philip Hammond
i
Getty/Christopher Furlong

The Chancellor is in denial: austerity and poverty go hand in hand

Author
Published date
Philip Hammond needs to accept that austerity has driven millions into poverty - and that the solutions to fix the economy are right under his nose.
  • The Chancellor Philip Hammond has rejected the findings of a UN report that up to 14 million people in the UK are living in poverty.
  • In the same interview he admitted that the economy wasn't working the way it was supposed to - but accused those who've been saying as much for years of having no solutions to fix it.
  • The TUC believes that reversing austerity is the best way to rebuild the economy, ease the pressure on the poorest and fix the pay and poverty crisis in the UK.

Chancellor Philip Hammond has been on the backfoot ever since a UN rapporteur lambasted his austerity policies in an excoriating report on poverty in the UK last week.

And today the media is full of stories about his refusal to accept some of the rapporteur’s findings on a Newsnight interview.

Specifically, he rejected claims that there are up to 14 million in the UK living in poverty.

It’s a surprising position to take given that the poverty Hammond denies comes straight from the official statistics.

But we shouldn’t be distracted by such attempts to dodge responsibility for last week’s damning report.

An important concession

While much of the media focus has been on Hammond's denial of a simple fact, there hasn’t been enough attention paid to his important concession about many people feeling like “the theory of how a market economy is supposed to work in generating and distributing wealth is at odds with the practice they are experiencing”.

And he went on to confess that the government had to ensure the market economy works “in the way the textbooks tell us that it will work…and to the extent that it’s not working we have got to evolve the system”.

This was quite the confession from a Chancellor who has steadfastly refused to pull the plug on the austerity agenda set in train by his predecessor George Osborne.

Yet instead of taking responsibility for the failure of austerity, he tried to claim that organisations that have consistently pointed out how the economy is failing (like the TUC) have no solution.

Austerity has failed

In reality it’s the Chancellor who has no solution, as evidenced by the standard lines he parroted on how record employment and repaired public sector finances showed austerity had been worth it.

The whole point of the UN report was to contest the government’s narrative that high employment is the solution to poverty (even the Financial Times admitted as much). Though in fairness, the Chancellor does deserve credit for indicating he will press on with upping the minimum wage.

And whether or not public finances have been repaired (and it’s important to remember that the national debt remains bigger than ever expected), austerity is a long way from being over.

Most economists understand that when the economy is already weak, austerity will only cause more damage. And that this damage hits workers the hardest.

Thanks to austerity, workers are suffering from the worst pay crisis in two centuries, soaring levels of insecure work and underemployment, and record levels of poverty.

In these circumstances, most economists don’t think slashing the welfare payments that support the most vulnerable in our society is the best way to fix the economy.

We do have a solution

Those who point out the failures of austerity do have solutions.

We're clear that the key to fixing our ailing economy is to reverse austerity. This will bring our beleaguered public services back from the brink, ease the pressure on the poorest in society, and bring an end to the pay and poverty crises.

Ending the vindictive attacks on trade unions will also help boost wages and restore dignity at work. Turning rhetoric to action on a twenty-first century industrial strategy will improve prosperity across the UK. And a domestic agenda of real substance is a fundamentally better alternative to a hard Tory Brexit.

So it seems that the only textbook that isn’t working is the one they use in the Treasury. If Mr Hammond is looking for a better textbook, here’s a suggestion for starters.