How mainstream economic coverage lets down British voters – and lets governments get away with austerity

EDITORIAL

RISHI Sunak’s Budget will objectively make Britain’s lower and middle classes worse off as the nation emerges into a post-Covid era.

The justification for the majority of the country losing money from their pockets has been, predictably, a form of rhetoric based around ‘balancing the books’.

‘Debt’ – mentioned six times during Wednesday’s Budget speech – was repeated across mainstream coverage, including the BBC.

No he doesn't, the government is not a household, it borrows the money from itself.

This is (again) propaganda. pic.twitter.com/o0e7jGsI0X
— Adam Smith (@adamndsmith) October 27, 2021

Though they later deleted the tweet to clarify that to ‘balance the books’ isn’t part of basic macroeconomics, it was indicative of the dumbing down of economic theory in mainstream coverage – and how misinformative it can become.

Last year the Institute for Public Policy Research (IPPR) urged the BBC to avoid inappropriately reporting on the British economy. Too often, the letter said, the economy was compared to a household budget.

As Redaction has highlighted when covering Modern Monetary Theory, the limiting factor to government spending is not the so-called deficit, but the level of demand and economic activity. Funds ‘raised’ from Sunak’s National Insurance rise won’t go to the NHS – taxes are a method to control inflation and the redistribution of wealth, not to pay for public services.

As Michael Jacobs wrote in the Guardian this week: “The Bank can continue to finance government debt at low interest rates, which means that financial institutions will continue to buy UK bonds: there is no sign of demand for them falling away.

“The government therefore still has room for further sustainable borrowing. More important, it has many highly productive investments for which it should borrow.

“In the end the only way to defeat inflationary pressures is to invest in productive capacity.”

Irresponsibly reported economic theory can allow the government to get away with austerity measures and taxes that hit the working class. Instead of being frustrated at the state not investing in public services, voters may think they need to ‘pay back’ taxes in order to pay down the debt following a year of increased pandemic spending.

This may read like an advert for Modern Monetary Theory – but realistically, most undergraduate economics students of any discipline know basic budget and inflation rules. It’s when the average British voter doesn’t get the necessary information, that governments can act with impunity.

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