(A2) Economics of Fiscal Austerity

​In this short revision video I try to explain some of the key arguments for and against the policy of fiscal austerity being carried out by the conservative government in an attempt to cut the budget deficit and control / reduce the scale of government debt as a share of GDP. It is essentially a debate between fiscal conservatives and Keynesian economists!
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Austerity policies a new study suggests has caused 120, 000 deaths.

The paper found that there were 45, 000 more deaths in the first four years of Tory-led efficiencies than would have been expected if funding had stayed at pre-election levels. On this trajectory that could rise to nearly 200, 000 excess deaths by the end of 2020, even with the extra funding that has been earmarked for public sector services this year.

The paper identified that mortality rates in the UK had declined steadily from 2001 to 2010, but this reversed sharply with the death rate growing again after austerity came in. From this reversal the authors identified that 45, 368 extra deaths occurred between 2010 and 2014, than would have been expected, although it stops short of calling them "avoidable".

Based on those trends it predicted the next five years - from 2015 to 2020 - would account for 152, 141 deaths - 100 a day - findings which one of the authors likened to “economic murder”.

The study, published in BMJ Open today, estimated that to return death rates to their pre-2010 levels spending would need to increase by £25.3bn.

Per capita public health spending between 2001 and 2010 increased by 3.8 per cent a year, but in the first four years of the Coalition, increases were just 0.41 per cent, researchers from University College London found. In social care the annual budget increase collapsed from 2.20 per cent annually, to a decrease of 1.57 per cent. The researchers found this coincided with death rates which had decreased by around 0.77 per cent a year to 2010, beginning to increase again by 0.87 per cent a year. And the majority of those were people reliant on social care, the paper says: “This is most likely because social care experienced greater relative spending constraints than healthcare."

It also notes that a drop in nurse numbers may have accounted for 10 per cent of deaths, concluding: "We have found that spending constraints since 2010, especially public expenditure on social care, may have produced a substantial mortality gap in England.”

The papers’ senior author and a researcher at UCL, Dr Ben Maruthappu, said this trend is seen elsewhere. “When you look at Portugal and other countries that have gone through austerity measures, they have found that health care provision gets worse and health care outcomes get worse, ” he told The Independent.

One of his co-author’s, Professor Lawrence King of the Applied Health Research Unit at Cambridge University, said "It is now very clear that austerity does not promote growth or reduce deficits - it is bad economics, but good class politics, " he said. "This study shows it is also a public health disaster. It is not an exaggeration to call it economic murder.”