The impact of austerity – and the alternatives

Posted by Joana Martinho Communications Officer, UK Poverty

11th Sep 2013

If you've seen the news in the last few days, you'll have no doubt come across the headlines that say the UK "has turned a corner", and that we are on the road to economic recovery. That might sound convincing but who is it that this recovery is helping and at what cost does it come? Who is paying the price for the continued austerity?

I ask these questions because I fear this country will look dramatically different ten years down the line, after austerity has wreaked its havoc. I fear the things I have counted on will no longer be there - here in the UK, and in Europe as well.

And it's not just me. Oxfam fears this too, because we have seen this happen before.

In the 1980s and 1990s, something similar to austerity hit Latin America. Something called 'structural adjustment'. Countries in this region were in financial trouble, and were helped by the International Monetary Fund, and the World Bank, in a very similar way to the way bailouts have been delivered in Europe in the last few years. In exchange, countries were expected to get themselves 'back on track' by cutting their spending, and so they privatised or cut health and education, and reduced salaries for public sector workers.

But this supposed 'cure' killed the patient: poverty rose in many of these countries and it took many years for living standards to return to the levels experienced before these policies were adopted. The gap between rich and poor increased, making these countries more unequal than before.

If growth has returned to the UK...it doesn't look like it's doing much for ordinary people.

It is hard to see how today's austerity in Europe will play out much differently. Even if growth has returned to the UK (and a few other countries), it doesn't look like it's doing much for ordinary people. In Britain, the number of people in 'working poverty' is increasing; families are taking on debt to be able to afford even the most basic things; and, most shocking of all, at least half a million people are now reliant on food handouts. This is just the beginning: the majority of austerity measures haven't hit us yet. And all the while, Britain's richest 1,000 individuals saw their wealth increase by £138bn between 2009 and 2013.

If we continue down this road, up to 25 million more people are likely to be in poverty in Europe by 2025 - almost all of the population of the Netherlands and Austria combined.

It doesn't have to be this way though. There is still time to change course, and there are clear alternatives to austerity. At Oxfam, we think the governments of the UK and Europe should:


1. Create jobs by building affordable homes, improving hospitals, repairing the road network, or by encouraging businesses to invest. The government could also create a universal free childcare system, which would mean many low-income parents would afford to work more hours, or keep more of their earnings (instead of spending them on expensive childcare) and pump them into the economy.

2. Improve dialogue between employers and employees by creating opportunities for employees to take part in the decisions on salaries in their company, for example. By strengthening the representation of workers and their collective bargaining, we would begin to reverse the tide of the past thirty years where incomes of the top 10% grew dramatically more than those of the poorest 10%, addressing the growing gap between rich and poor.

3. Tackle tax avoidance and evasion by closing loopholes and cracking down on tax havens. This would not only make things fairer - for businesses and individuals - but it would also ensure we get the society we want in the future. A future with decent health and education for everyone, and a safety net that catches people when they find themselves in a crisis, and supports them to build a sustainable livelihood.


We can afford to do these things. What we can't afford is to create a society that is more unequal, more vulnerable to financial crises, and less tolerant.


Find out more

Oxfam's new report "A Cautionary Tale: The true cost of austerity and inequality in Europe"

Listen to Danny McCafferty, Chair of the Clydebank Independent Resource Centre in Scotland, talking about the impact of austerity measures on the people he meets and works with every day. For more audio updates, visit our Audiobook channel


Blog post written by Joana Martinho

Communications Officer, UK Poverty

More by Joana Martinho