A Century of Fiscal Squeeze Politics: 100 Years of Austerity, Politics, and Bureaucracy in Britain
Dr Rozana Himaz (Senior Lecturer in Economics at Oxford Brookes University) and Professor Christopher Hood examine how different the politics of fiscal squeeze and austerity is today from what it was a century ago, how (if at all) fiscal squeezes reshaped the state and the provision of public services, and how political credit and blame played out after austerity episodes.
Since 2010, the UK has already experienced one of the longest periods of public spending restraint over the last century. However, year-to-year cuts in public spending were notably less deep than after both World Wars and the ‘Geddes Axe’ cuts of the 1920s.
The term ‘austerity’ is widely used to describe the UK government’s tax raising and public spending policies since 2008-09. However, in their book, Dr Rozana Himaz and Professor Christopher Hood examine successive fiscal squeezes between 1900 and 2015, showing how different the politics of fiscal squeeze and austerity is today from what it was at other periods over the century.
Their research identifies a long-term shift from what they term a ‘surgery without anaesthetics’ approach (deep, but short-lived episodes of spending restraint or tax increases) in the earlier part of the period towards a ‘boiling frogs’ approach (episodes in which the pain is spread out over a longer period) seen in more recent decades.
Large tax hikes which pushed up revenue both in constant-price terms and relative to gross domestic product (GDP) were commonly used by earlier governments often as a prelude to a spending squeeze.
However, according to this new research, they have not played such significant part in the most recent period of austerity. Whether this means that big revenue increases have gone for good as an option for fiscal squeeze is not clear.
Dr Rozana Himaz, from the Department of Accounting, Finance and Economics at Oxford Brookes University said: “Our work opens up a new way of conceptualising and measuring episodes of austerity and its political losses, cost and effort. The approach helps solve certain puzzles such as why voter 'punishment' of governments that impose austerity policies seems to be so erratic."
Professor Christopher Hood, All Souls College, University of Oxford said: “What is most distinctive about UK's most recent fiscal squeeze is that it has not featured a 'hard' revenue squeeze of tax rises, while comprising one of the largest spending squeezes in the century. This outcome raises the interesting question about whether the structure of modern state spending makes it harder than before to put the breaks on."