This was first published as a column in the Independent, on Sunday, 26th August, 2018
On holiday in the in the safe Tory seat of Richmondshire in the Yorkshire Dales this week, we watched as a dedicated sheep farmer demonstrated the skills and athleticism of his working dogs. Five generations of Richard Fawcett’s family have since 1918 farmed The Croft at Hardraw, Wensleydale. Today, he explained to the watching crowd, the family enterprise was under threat from the possible removal of subsidy.
This is a threat posed not just by Brexit, but by an ideology, if that is not too strong a word, deeply ingrained in orthodox economics: namely ‘the Treasury view ’, summarised as follows: public subsidies and grants should be cut, so that global competitiveness prevails, and government budgets always balance.
Central to ‘the Treasury view’ is the belief (and it is a belief) that vital subsidies like those made to farmers, or local authorities, or the NHS, are a) unnecessary in a globalised economy where the services and products of farmers or doctors and nurses can be obtained elsewhere at lower public cost. And b) that the services of e.g. hill farmers are unaffordable by a nation with one of the biggest economies; with rich and fertile farmland and hardworking farmers; with a history of extraordinary innovation and resilience; with sound institutions and with a developed monetary system backed up by more than 30 million taxpayers.
Few other nations can boast such a wealth of human, institutional and ecological resources.
Yet Treasury orthodoxy dictates that farmers may be denied subsidies; that local governments must have their grants slashed; that the NHS is starved of central government finance, and that workers’ wages must be kept low – to permit the economy to become globally competitive; and for it to expand and public debt to fall.
Yet that is not how things have turned out.
Under George Osborne’s original (2010) plans, cuts to the growth in government spending would lead to a fall in the level of public debt of 70.3% in 2013-14. Instead Britain’s public debt rose, and peaked at 85.6% of GDP in 2017-18. So three years of cuts in the growth of government spending became eight – and still the public debt kept rising. In the original ‘peak year’ (2013-14) debt was predicted to be £1,240bn. In 2017-18 it will be more than a half a trillion pounds higher at £1,780bn.
As Paul Johnson noted on the BBC’s Today programme this week, Britain’s public debt at 85% of GDP is now more than twice as high as it was before the Global Financial Crisis. In the view of a dogged and irrational Treasury, the rising level of public debt is not a function of a weakened economy and low public investment. No, it is a reason to keep digging the austerity hole deeper.
But government promises that austerity would expand economic activity have just proved false. Britain has lived through the most dismal decade on record for GDP growth. There was a slight bounce-back in household spending to 0.3% in Q2 from 0.2% in Q1, but at a time when sterling is more competitive than for years past, exports fell by 3.6%, recording their worse quarter for six years. Business investment rose a little (+0.5%) following a decline in the previous quarter (-0.4%) – but remains very low. And output figures show that manufacturing fell back into recession in the first half of 2018, with declines of 0.1% in Q1 and 0.9% in Q2.
And while it is the case that between 2008-09 and 2016-7 employment rose by 2.1 million, the Resolution Foundation this week showed that over half (55%) of people that moved into work, lived in households in the bottom third of the income distribution, and two thirds came from the poorer half of households – a group likely to have relatively low levels of formal education. In other words, at a time of low levels of productivity, instead of investing to upgrade skills and wages, Britain is cutting spending on education, and expanding low-skilled and low-paid economic activity.
The insecurity of British farmers intensified on Friday when the head of the WTO, Roberto Azevedo, warned of the threat to British exporters of a No Deal Brexit. “If other countries” begin to sense an opportunity to increase the market share or increase the quota here or there, they’re going to go for that…It is very unlikely that you’re going to have 100 per cent agreed outcome for all WTO members between now and March.”
The approach of leading government ministers is to say: so be it. Brexit should expose Britain’s farmers to the ‘globalisation’ of food production, even if the icy winds of international competitiveness and government cuts destroys the achievements and traditions of families like those farming in Wensleydale.
After all, they argue, 56.8% of the voters in Richmondshire (of which Wensleydale is a part) voted to support the Leave Campaign.