The idea that the country could spend less on key frontline services than what was planned before the pandemic needs to be discarded
Last week the chancellor, Rishi Sunak, claimed in a TV interview that the government cash being spent to keep the economy running during the pandemic was not his money to spend but the viewers’ money. The subtext was that Covid-19 bills would have to be paid for. Mr Sunak was channelling his inner Margaret Thatcher, who in 1983 told her party conference that there is “no such thing as public money; there is only taxpayers’ money”. It is rhetoric frequently used by those who wish to suggest that the government faces the same budget constraints as a household. It is also economically illiterate.
The UK is not going to run out of money. The Bank of England is financing Covid spending by buying up huge amounts of Treasury debt under quantitative easing. Lord Turner of Ecchinswell, a former City regulator, told peers earlier this year that QE “is lubricating a fiscal expansion and making it easy for the government to run large fiscal deficits without the danger of setting a rise in interest rates”. We are living in an era of cheap money. Boris Johnson’s apparent repudiation of his own party’s austerity policies cannot be squared with real-terms cuts to some department budgets. The Treasury remains committed to balancing the books in mean-spirited ways: whether it is paying nurses a miserly 1% extra or cutting aid to the poverty-stricken parts of the globe. However demotic the slogans used by Mr Johnson, his words all too often betray the party’s real instincts. While Mr Sunak won’t find the cash to pay for catch-up lessons, his boss praises rich parents who buy private tuition because they “work hard”.