Is the real age of austerity now with us?

Look around and there are a lot of deals to be had. If you listen to commercial radio, you’ll hear discounts being bandied around. I’ve yet to see many ‘buy now – pay in 2026’ offers – but I think they’ll come and possibly in time for Christmas. Is the real ‘age of austerity’ now upon us?

​The phrase was first coined as a descriptor for the period immediately after World War Two. In 2008 the first governmental measures of austerity for the modern age were introduced – leading to the phrase coming back into common parlance. Public spending shrank, financial responsibilities previously borne by local government shifted onto the shoulders of the public and we all felt the difference. Now it’s happening again through the longer economic effects of the pandemic, the global costs of the invasion of Ukraine and increases in the price of fuel. The result has been yet further tightening of belts and more local authorities warning of financial stress or, as happened to Northamptonshire County Council not once but twice, the issuing of a Section 114 notice, whereby by the issuer signals that it can only pay for its statutory public funding obligations alone.

​Set against such a background it seems incredible to have witnessed the effects of the policy of the Bank of England in pushing up interest rates rises from December 2021. The last time they were as high as this was 2008 when they then crashed to 0.5% – ring any bells? And the cause of today’s increases? Inflation. The bete noir of the Bank of England, inflation (or at least fast increasing inflation) is deemed bad for the economy. Strangely, it is generally accepted that some inflation is good for the economy. But, of course, it has to be the right inflation in the right places.

​All this tinkering with interest rates by the Governor of the Bank or England and the Bank’s Monetary Policy Committee comes at a wider cost than just to the stocks, shares and brokers though. From politicians to the public alike we’re all feeling it and in theory we’ll continue to do so until either inflation really does come down – or some bright spark runs riot with the ‘buy now pay later’ inducements. If that happens there’ll be new opportunities for credit card companies and if credit is too easy to obtain it will torpedo any likelihood of inflation coming under control. Remember the credit boom of the 80s? I do – and the consolidation loans which then followed, priced at 29% and more. Did we worry then? Not really – as long as we could make the minimum payments each month we kept going, fuelling the economy and riding around on a seemingly permanent cushion of debt. It could happen again.

​Of course, this doesn’t apply to everyone. We’re told that wage rises have shot up in the past couple of years and that the economy has heated up faster than anticipated. Last year the Governor of the Bank of England Andrew Bailey appealed for restraint in wage demands. From the perspective of a remuneration package in excess of half a million pounds a year, or about £300 per hour compared to the UK Living Wage of £10.90 that smacks of ‘I’m alright, Jack’ – but I can see his point.

​But tell that to those who have a different reality to contend with. How many people will be walking around with the new iPhone 15 shortly at a minimum cost of £799? How many children went off to school this term brandishing new laptops? And how much of this was financed, over a number of years, rather than paid for outright? The answer, I think, will be simply – most. Why? Because there’s no other option. And which portion of society will be feeling this more than any other over those years? It’ll be the portion with the least amount of disposable cash.

​I have no problem with people receiving large incomes if they warrant them – but surely we need to find ways to ease the have/have not divide because it’s likely that those with the smallest incomes are proportionately seeing more real austerity in their lives than the rest.