Thread by @alfie_stirling

New @NEF analysis out today shows effects of austerity since 2010 have had standalone effect of making economy £100bn smaller per year, £3600 per family

Rarely has sustained, deliberate action by a UK government caused so much harm to its own country 1/13
neweconomics.org/2019/02/auster…

Today’s public sector finance release will likely show we’re on course for the smallest government deficit – difference between public spending and revenue – since 2001. What they don’t show is the economic damage it has caused to get here. 2/13 ons.gov.uk/economy/govern…

The human impacts have always been clear. Whether rising homelessness, frozen benefit payments, overcrowded school classes or excessive A&E waits, the starved ambition and resources of our public realm have touched the lives of almost everyone. 3/13
independent.co.uk/news/uk/home-n…

But economists' obsession with GDP has muddied the water. A lack of clarity over the observable effects of austerity on GDP has limited the interest of much of the mainstream commentariat, unlike with Brexit where such analysis has been common place. 4/13
bankofengland.co.uk/speech/2019/ge…

So what impact, if any, has austerity had on the country’s overall level of income? Thanks to relatively recent innovation from OBR it is possible to get closer to the answer than ever before. 5/13 obr.uk/fer/forecast-e…

Assisted by IFS work, OBR now publish the isolated effects of ‘discretionary fiscal policy’ – active government decisions over tax & spending – on GDP growth. This improves on past estimates that did not disentangle government decisions from other economy-wide effects. 6/13

Following a similar approach to that previously adopted by others (see link), new NEF analysis has built on the latest figures to estimate the effects of austerity on GDP over the decade so far.

The calculations make for grim reading. 7/13 mainlymacro.blogspot.com/2018/03/the-ec…

The isolated impact of government policy has reduced GDP growth every single year since 2010. After compounding this effect year-on-year, the effects of austerity are expected to have suppressed the level of GDP by 4.7% in 2018/19, almost £100 billion per year. 8/13

That's just under £1,500 per person & more than £3,600 per family. Meanwhile, Brexit uncertainty since 2016 referendum thought to cost economy 2% GDP by 2018/19, which is around £600 per person or £1,500 per household per year. Although this could get worse after 29 Mar. 9/13

Government will point to standard assumptions that effects of fiscal policy erode over time. But this is normally because monetary policy is supposed to offset any big affects from government decisions by changing interest rates... 10/13

But it is unlikely that this has happened to any great extent. As early as 2009, interest rate cuts reached a point beyond which further reductions had little or no positive effect on spending in the economy – what economists now refer to as the ‘effective lower bound’. 11/13

Available evidence also supports this. Economy almost returned to recession after 2010 austerity & recovering the so called ‘output gap’ – difference between actual output & hypothetical output given technology & willingness to work – also stalled. 12/13 ippr.org/research/publi…

Chancellor may meet deficit targets this year. Will have to wait & see. Either way bigger picture is livelihoods of people & communities have been made bleaker as a direct consequence from actions of their own government. Next time must be different. 13/13 neweconomics.org/2019/02/auster…