Austerity Doesn’t Work

In the aftermath of the 2008 financial crisis, the United Kingdom embarked on a bold fiscal experiment. “Austerity” – a program of deep public spending cuts and public sector pay freezes – was sold to the public as the bitter medicine needed to reduce government debt and restore economic stability. Starting in 2010 under Prime Minister David Cameron’s coalition government, austerity was touted as the only responsible path: just like a household tightening its belt during hard times. But a decade and a half later, the results of this grand experiment are painfully clear. Far from delivering prosperity, austerity has strained Britain’s social fabric, weakened its economy, and even failed on its own terms. This narrative-driven explainer will show how austerity in the UK (from the post-2008 period to the present) has not worked – exploring real-world case studies from the NHS to local councils – and compare the UK experience with other countries. We will also address the common economic justifications for austerity, counter them with evidence, and examine long-term impacts on public trust, infrastructure, growth, and social wellbeing. Finally, we’ll end with a vision for an alternative economic model grounded in dignity, sustainability, and investment in people.

The UK’s Post-2008 Austerity Experiment

In 2010, with Britain’s budget deficit at its highest since World War II, the incoming government argued there was “no alternative” to sweeping cuts. Chancellor George Osborne warned “we can’t go on like this” as he pledged to eliminate the deficit and start shrinking the national debt. Over the next several years, budgets for welfare, local government, housing, policing, and many other services were slashed. By some measures, between 2010 and 2020, numerous public agencies saw their funding reduced by *over 30% in real termstheguardian.com】. The austerity programme touched nearly every aspect of public life – except, ostensibly, the National Health Service (NHS), which was said to be “ring-fenced” from cuts. Ministers repeated a comforting analogy: government must balance its books just like any family, even if that meant sacrifices in the short term.

Reality check: Did this painful belt-tightening fix the public finances as promised? The evidence says no. The UK government never did eliminate the budget deficit – not by 2015 as originally planned, nor even by 2020. And the national debt (the sum of all yearly deficits) has steadily risen. In 2010 the UK’s public debt stood at about 65% of GDP; by early 2024 it had *climbed to roughly 96% of GDP – the highest level since the 1960stheguardian.com】. In other words, after years of cuts that squeezed public services, the country’s debt burden increased instead of decreased. Britain’s economy grew slowly in the 2010s, so shrinking the government also shrank overall demand, making it harder to reduce the debt-to-GDP ratio. Indeed, many economists now refer to the 2010s as a “lost decade” for the UK. By 2020, average real wages had barely recovered to pre-2008 level】, productivity growth was anaemic, and inequality had widened. Life expectancy – a key indicator of social progress – stalled for the first time in over 100 years, and even *started to fall for the poorest 10% of women in Englandtheguardian.com】. Far from ushering in a new era of prosperity, austerity left Britain with the weakest economic recovery on record and deep social scartheguardian.comtheguardian.com】.

Why didn’t austerity deliver on its central promise of fiscal health? One reason is that the famous “household budget” analogy is fundamentally flawed. While it sounds intuitively sensible that a government should tighten spending just as a family would when income drops, what holds true for one household doesn’t hold true for an entire economy. If all households cut spending at once, overall demand in the economy falls, businesses lay off workers, and growth stalls – making everyone worse off. As economist John Maynard Keynes warned with the “paradox of thrift,” collective belt-tightening in a slump can be self-defeatintheguardian.comtheguardian.com】. This is exactly what happened in the UK: government cuts meant fewer contracts for firms and less money in consumers’ pockets, which dampened the post-crisis recovery. Austerity’s advocates claimed that spending cuts would restore confidence and unleash private-sector investment, but the opposite occurred – businesses held back, seeing weak demand. As a result, even by the end of the decade the government missed *every one of its own debt-reduction targetstheguardian.com】. The UK had to keep postponing its goal to balance the budget while public infrastructure decayed and public services struggled to cope.

Frontline Impacts in Britain: Case Studies of Austerity’s Toll

The abstract numbers only tell part of the story. To really understand what austerity meant, we must look at how it affected daily life in the UK. From healthcare to housing to local communities, the real-world impacts of austerity have been profound:

• Health Service Strained: The NHS may not have been directly cut in cash terms, but austerity effectively froze health funding at a time of rising needs. After 2010, NHS spending increases barely kept up with inflation and an aging populatio】. Adjusted for the growing number of older patients, *health funding was essentially flat for a decade】. This meant hospitals and clinics had no extra resources to invest in new staff, modern equipment, or expanded services, even as demand grew. By the late 2010s, waiting times in A&E (emergency rooms) were hitting record highs and the NHS entered the COVID-19 pandemic stretched perilously thi】. Public health budgets (for preventive services and pandemic preparedness) were also quietly squeezed, undermining Britain’s resilience to shock】. Research by the Institute for Public Policy Research and others later concluded that austerity left the NHS less able to cope with crises and contributed to the UK’s tragic pandemic outcome】. The human cost is stark: one academic study linked funding cuts in health and social care to *around 120,000 excess deaths from 2010–2017independent.co.ukindependent.co.uk】 – lives lost not solely due to specific illnesses, but to a system pushed beyond its limits.

• Mental Health and Social Care Erosion: Services that support mental wellbeing and vulnerable people have faced some of the harshest cuts. Local councils, which fund social care, mental health outreach, and community programs, saw their budgets slashed. By 2019, cultural, environmental, and planning services funding (which includes parks, libraries, community centres – places that foster social connection) had been cut by *17% on average across England】. These amenities aren’t luxuries; they help maintain mental health and community cohesion. A 2023 study in BMC Public Health found that such council budget cuts were directly associated with worsening population mental health, especially in areas that lost funding for things like libraries and green space】. At the same time, demand for mental health support was rising due to economic stress. The result was a widening gap between needs and services. NHS mental health trusts struggled with limited funds and staffing shortages, leading to long waits for therapy or specialist care. Charities report that more people in acute crisis have fallen through the cracks. In short, austerity created a perfect storm: more people in distress, fewer resources to help them, and many knock-on effects – from higher homelessness to greater strain on police and A&E departments dealing with crises on the streets.

• Local Government Cuts and “Lost” Services: The UK’s local councils are responsible for a host of everyday services – from repairing roads and running buses to maintaining libraries, youth clubs, and social care homes. During the austerity years, central government funding to councils was drastically reduced. Councils in England saw over a third of their spending power disappear on averagtheguardian.com】, forcing extremely difficult choices. Many councils cut non-statutory services to the bone: public libraries reduced hours or closed (almost *800 libraries shut down between 2010 and 2019】), youth centres were shuttered, and road maintenance deferred. Even critical areas weren’t spared – for example, the budget for adult social care failed to keep pace with an aging population’s needs, contributing to a care crisis. Several local authorities tried to cope by outsourcing or privatizing services, while others drained reserves. By the late 2010s, some councils hit financial breaking point. In 2018, Northamptonshire County Council effectively went bankrupt and was taken over by government commissionernewyorker.com】, a fate echoed by a handful of others in subsequent years. These local funding failures meant real impacts on residents: fewer buses in rural areas, potholes going unrepaired, trash piling up uncollected on schedule, and vulnerable people not receiving timely care. The closure of youth services and community centres has also been linked to rises in crime and antisocial behavior in some areas, as bored young people had nowhere to go. In sum, austerity at the local level “hollowed out” many basic services that people take for granted in a civilized society.

• Housing and Homelessness: Austerity policies hit housing in multiple ways. Public investment in affordable housing was cut back severely, and the government’s cap on housing benefits (through measures like the bedroom tax and overall benefits cap) meant many low-income renters in high-cost areas could no longer afford their homes. Social housing construction dropped even as private rents rose, creating a perfect storm for housing insecurity. By pushing public housing tenants into the private market with insufficient support, austerity created “no-go areas” for low earners in many cities – entire neighborhoods became unaffordable to those on benefit】. One glaring outcome was a sharp rise in homelessness and rough sleeping. The number of people sleeping rough in England more than *doubled between 2010 and 2023theguardian.comtheguardian.com】, reaching levels deemed a “national shame” even by 2024. Homelessness charities point to cuts in housing support and social services as key drivers of this crisis. At the sharp end, more families ended up in temporary accommodation or reliant on emergency shelters. It is telling that even as Britain is one of the wealthiest countries in the world, over 100,000 children were living in temporary homeless accommodation in 202theguardian.com】. Austerity’s housing squeeze didn’t just hurt the poorest: combined with years of weak wage growth, it contributed to home ownership becoming a distant dream for many young people, and a generation of “generation rent” struggling with high costs and insecurity.

• Welfare Reform and Poverty: Perhaps nothing exemplifies austerity’s human cost more starkly than the stories of families skipping meals or relying on food banks. The introduction of Universal Credit (UC) – which merged multiple benefits into one and imposed a mandatory waiting period for first payment – was part of the austerity-driven welfare overhaul. The goal was to save money and incentivize work, but the immediate effect for many was hardship. The five-week wait for UC (initially without adequate emergency support) pushed people into rent arrears and debt. Benefit sanctions and caps left some without any income for weeks. By 2018-19, the UK’s largest food bank network, the Trussell Trust, was distributing 1.6 million emergency food parcels a year, an almost twenty-fold increase from 201theguardian.comtheguardian.com】. In fact, *the number of Trussell Trust food banks grew from just 35 in 2010 to over 1,300 by 2019theguardian.com】 – and including independent food banks, there are now roughly *2,800 food banks across the UKtheguardian.com】, outnumbering even the number of McDonald’s restaurants or public libraries in the country. This explosion in food poverty coincided directly with austerity policies and welfare cuts. Child poverty also rose markedly in the 2010s. Teachers began reporting more children coming to school hungry or ill-clothed – phenomena unseen in Britain for decades. As one commentator put it, these are “austerity’s children” living through the “hungry ‘20s” in food bank Britaitheguardian.comtheguardian.com】. The government eventually acknowledged some problems – for instance, introducing a limited “Universal Credit uplift” during the COVID-19 crisis – but that temporary £20/week boost has since been removed, plunging many back into precarity. The overarching picture is that austerity in welfare reversed progress made in reducing poverty: by the end of the decade, millions of households were worse off, and public health indicators like life expectancy and child hunger were going in the wrong directio】.

These case studies from the UK illustrate how austerity has had far-reaching and lasting consequences. Services that people rely on in tough times – healthcare, social care, housing support, community networks – were weakened just when they were most needed. The social safety net developed after World War II was badly frayed. And while the cuts were often justified in the name of “efficiency” or eliminating waste, in practice they frequently shifted costs elsewhere: for example, cutting mental health services didn’t eliminate mental illness, it just meant more sufferers ended up in emergency rooms or run-ins with police (which is more expensive in both economic and human terms). Cutting youth clubs didn’t save communities money in the long run if it contributed to higher crime and prison costs later. Austerity, in effect, was a false economy.

Common Justifications vs. Economic Realities

Supporters of austerity advanced several economic arguments to defend it. It’s important to examine these claims and compare them to what actually happened:

• “We must tighten our belts like a household” – the Household Analogy: As discussed earlier, this is the most common refrain. It frames the nation’s budget like a personal credit card bill that has gotten too high. While families indeed can’t spend beyond their means for long, a national economy doesn’t work like a household. One person’s spending is another’s income; the government’s spending is the private sector’s revenue. When the UK government slashed spending, it pulled money out of the economy at a time when businesses and consumers were already reeling from a recession. The result was predictable: growth slowed significantly. In fact, Britain’s tentative recovery in 2009-2010 stalled once austerity measures kicked in, whereas countries that delayed austerity (or pursued stimulus) recovered fastepmc.ncbi.nlm.nih.gov】. As economist Robert Skidelsky noted, what makes sense for one household in isolation becomes a fallacy of composition if everyone does it at onctheguardian.comtheguardian.com】. There is also a moral dimension: a government is not just another market actor, it’s there to take care of its citizens – to invest when others won’t, and to maintain demand so that the whole economy doesn’t spiral downwards. Ironically, by 2019 the UK government was still borrowing tens of billions (since the deficit wasn’t closed), but now with depleted public services to show for it. Households were poorer and the “family finances” of UK plc were arguably worse.

• “High public debt hurts the economy and must be reduced at all costs”: Another justification for austerity was that government debt had become unsustainably high after the crisis and risked undermining confidence or even causing a Greek-style crisis in the UK. It’s true that debt rose in the recession – but historically, Britain has carried much higher debt (well above 100% of GDP after WWII) and managed it through growth. Under austerity, debt did not fall as we saw – it rose to the highest levels in half a centurtheguardian.com】. The promised boost to confidence never materialized; instead business investment languished. Meanwhile, ultra-low interest rates meant the government could borrow cheaply throughout the 2010s. Critics argue that obsessing over debt in a slump was counterproductive: with borrowing costs near zero, it was exactly the time to invest in infrastructure and skills, which would have grown the economy and made the debt relatively smaller. Even the International Monetary Fund (IMF), initially a cheerleader of austerity, later admitted it underestimated how damaging austerity would be. In a 2013 internal report, the IMF confessed that Greece’s forced austerity led to a “much deeper than expected recession” with “exceptionally high unemployment” and that “market confidence was not restored” by the cuttheguardian.comtheguardian.com】. In the UK’s case, austerity arguably undermined long-term debt sustainability by stunting GDP growth and eroding public assets (like health and education) that are the foundation of future prosperity. As Nobel-winning economist Joseph Stiglitz and colleagues succinctly put it in an open letter: *“this government has missed every one of its debt reduction targets because austerity simply doesn’t work.”theguardian.com】

• “We must be fiscally responsible to protect future generations”: Austerity was often framed as a moral duty to our children – to “not saddle future generations with debt.” But future generations don’t just inherit debt; they also inherit infrastructure, public institutions, and human capital. Cutting funding for schools, training, or environmental protection is like a family scrimping on their kids’ education to pay off the mortgage faster – penny wise, pound foolish. After a decade of under-investment, the UK’s transport network, national infrastructure, and R&D capacity all lagged behind. The potholes in the roads, the outdated hospital equipment, the lack of affordable housing – these are also burdens on future generations. Moreover, the burden of debt is often overstated: governments typically don’t pay off debt in full like a household would; they roll it over, and as long as the economy grows, the debt becomes more manageable over tim】. By 2019, even with a larger debt, the UK’s interest payments on debt were low as a share of GDP thanks to low interest rates. In contrast, the social deficits created by austerity – in child poverty, in mental illness, in skills and productivity – are very real bills that future generations are now having to pay. It’s telling that youth disenchantment grew during the austerity era; many young people in 2010s Britain felt worse off than their parents, a reversal of the post-war trend. In short, austerity mortgaged the future in the name of saving it.

• “We need to shrink the state for a dynamic economy”: Some proponents had an ideological motive – they saw austerity as a way to permanently reduce the size of government, under the theory that a leaner state would free up the private sector. Public spending was portrayed as wasteful or crowding out private initiative. However, the experience of austerity Britain shows that a diminished state can lead to a diminished economy. The UK’s private sector did not roar to life after 2010; instead, business investment remained below pre-crisis trends and productivity growth collapsed. One reason is that government and private sector are interlinked: government investment in things like transport, broadband, or worker training boosts private sector productivity. When Britain cut back on these, it also got less dynamic private enterprise. For example, cancellation of or delays in major projects (from railway upgrades to green energy schemes) not only meant shabbier infrastructure, but also lost industrial opportunities. Austerity’s deep cuts to university and R&D funding early on may have contributed to the UK’s stagnation in innovation. And socially, the attempt to “shrink the state” had ugly side-effects: rising inequality and insecurity can foster less risk-taking and entrepreneurism among a stressed populace. By the late 2010s, even some business leaders were calling on government to spend more to support the economy – hardly the outcome austerity ideology had promised.

In summary, the economic justifications for austerity largely fell apart in practice. The UK did not experience an investor crisis or runaway inflation in the 2010s – instead, it experienced sluggish growth, very low interest rates, and plenty of fiscal room that arguably went unused. Meanwhile, the cuts intended to strengthen the economy ended up weakening its foundations. Austerity was defended as “living within our means,” but it left Britain less capable, less healthy, and, as data now shows, even less fiscally secure than before.

International Comparisons: Austerity Abroad

The UK was far from alone in pursuing austerity after 2008. Many other countries implemented similar policies, with varying results. Comparing Britain’s experience with a few international examples – Greece, Ireland, and Germany – highlights both common patterns and important differences, underscoring that austerity’s impact has been overwhelmingly negative.

• Greece: No discussion of austerity is complete without Greece, the hardest-hit country in Europe’s debt crisis. Starting in 2010, Greece had to impose draconian austerity measures as a condition of international bailouts. Public sector wages and pensions were cut, taxes raised, and vital services pared back. The outcome was a social and economic catastrophe: the Greek economy shrank by an astonishing 25% (a depression-level collapse) and unemployment spiked above 25%, with youth unemployment over 50%. Public health suffered – HIV infection rates, for example, surged in the aftermath as prevention programs lost funding. The IMF later admitted it massively miscalculated the fiscal austerity multiplier for Greece and that the “price extracted” for the bailout was far too higtheguardian.comtheguardian.com】. While Greece needed reforms and better tax collection, the severity of cuts created a downward spiral (GDP fell, making debt even harder to sustain). By 2018, Greece’s debt-to-GDP was higher than when austerity began, despite all the pain. Greek society also bore long-term scars: elevated suicide rates, brain drain as young professionals emigrated in droves, and a collapse in public trust in institutions. In 2015, Greek voters even elected an anti-austerity government that briefly defied creditors – a drama that underscored just how deeply unpopular and damaging the policies were. Greece’s ordeal stands as a stark warning: austerity in a depressed economy can be self-defeating, causing so much damage that it fails even on fiscal terms (debt sustainability) while inflicting immense human sufferintheguardian.comtheguardian.com】.

• Ireland: Ireland was often cited by austerity proponents as a “success story.” After a severe banking crisis, Ireland implemented tough austerity budgets between 2009 and 2014 (cutting public sector pay, reducing welfare benefits, introducing new taxes), and its economy returned to growth relatively quickly. By 2015, Ireland was posting some of the fastest GDP growth rates in Europe, and it exited its bailout program earlier than expected. However, a closer look reveals a more complicated picture. Much of Ireland’s “recovery” was driven by unique factors like foreign tech and pharma multinationals (attracted by low tax rates) and statistical quirks (one famous year Ireland’s GDP jumped 26% due to corporate reclassifications, dubbed “leprechaun economics”). Ordinary Irish people endured significant pain: unemployment hit 15% at the peak, average disposable incomes fell sharply, and emigration spiked as young Irish left for jobs abroawww-cdn.oxfam.orgwww-cdn.oxfam.org】. Inequality worsened – the poorest decile saw incomes drop over 20%, while the richest saw slight gainwww-cdn.oxfam.org】. An Oxfam report warned that despite deficit reduction, austerity was eroding Ireland’s social fabric and safety net, with child poverty and homelessness risinwww-cdn.oxfam.orgwww-cdn.oxfam.org】. Indeed, Ireland had to boost social spending again later to tackle a homelessness crisis in Dublin. The lesson from Ireland is that measured purely by GDP, austerity coincided with recovery – but much of that growth didn’t translate to broad wellbeing initially. Ireland’s rebound was helped by external demand and a flexible currency (the euro’s value drop helped exports) rather than the cuts themselves. In fact, researchers have argued that *Ireland’s growth happened in spite of austerity, not because of itphys.org】. Plus, the social costs – from mental health issues to a fractured public service landscape – took years to repair. So Ireland’s austerity is not a model most countries would want to emulate wholesale, especially given the hardship it imposed on its citizens.

• Germany: Germany’s situation differed – as Europe’s largest economy, it wasn’t forced into austerity by markets, but it chose a form of it, both domestically and as a prescription for others. Culturally, Germany has long favored fiscal discipline (rooted in memories of past hyperinflation), epitomized by the “Swabian housewife” mantra quoted by Chancellor Angela Merkel: “You cannot live beyond your means.” After 2010, Germany introduced a constitutional “debt brake” and pursued a goal of balanced budgets (the “schwarze Null” or “black zero”). It did make some spending cuts (e.g. certain welfare benefits) and achieved budget surpluses by the mid-2010s. Supporters pointed out that Germany’s economy grew and unemployment fell to record lows. However, it’s worth noting Germany’s success was fueled largely by its strong export industry and the demand from other countries (including those doing stimulus). Critics argue that Germany’s austerity at home and imposed on the Eurozone contributed to imbalances: Germany saved more instead of spending, relying on others to buy its goods. Domestically, Germany’s obsession with balanced budgets led to under-investment in infrastructure – for years, German public investment was so low that roads and bridges deteriorated and digital infrastructure lagged behind. By 2019, even the IMF was urging Germany to spend more on infrastructure for the sake of the global economy. In late 2023, Germany faced an energy and industrial downturn, and the lack of past investment made it harder to respond. In short, Germany’s economy did OK during the 2010s, but one could argue this was despite fiscal austerity, not because of it (its powerhouse export sector and short work scheme preserved jobs, along with benefits from a weaker euro). Moreover, Germany’s push for austerity across Europe (e.g. strict EU deficit rules) has been heavily criticized for choking off Europe’s post-2009 recovery. Only when the EU suspended these rules during COVID-19 did Europe avoid repeating the mistakes. The German example shows that a fixation on austerity can come at the cost of long-term dynamism – a surplus today but crumbling infrastructure tomorrow is not a win.

Across these examples, a pattern emerges: austerity tends to hurt ordinary people and can be counterproductive economically. In Greece, it was disastrous. In Ireland, it was harsh and its “success” hinged on special circumstances. In Germany, it delivered surpluses but arguably at the cost of needed investment. The UK’s own mixed record fits this pattern too. Perhaps most tellingly, by the end of the 2010s, even institutions like the IMF and many economists had shifted their view – acknowledging that overly aggressive austerity in a depressed economy is a mistake. The experience of multiple countries showed that while fiscal responsibility is important, the timing and balance matter: cutting too much, too fast, when economies are weak, does far more harm than good. Austerity, as a one-size-fits-all policy, has been widely discredited.

Long-Term Impact: Trust, Infrastructure, and Wellbeing

Austerity’s legacy in the UK is not only economic, but also political and social. Over the long term, the policy has had corrosive effects on public trust, national infrastructure, and the overall wellbeing of society:

• Public Trust in Government: The years of austerity eroded many people’s faith that the government is acting in their best interest. When politicians insisted “we’re all in this together” while cutting services that the poorest relied on, it bred cynicism and anger. Scandals of MPs’ expenses and perceptions of tax breaks for the wealthy during austerity (for example, cutting the top tax rate in 2013) fueled a sense that the pain was not shared fairly. This loss of trust has lingering effects. Some analysts link the anger and hopelessness in de-industrialized, austerity-hit regions to the Brexit vote in 2016 – a wave of protest against “the establishment.” Whether or not austerity directly caused Brexit, it certainly shaped a political environment of disillusionment. Likewise, the rise of populist sentiment and distrust in expert advice can be partly attributed to years of cuts that left people feeling ignored. When, for instance, local libraries or bus routes disappeared, it signaled to communities that their government didn’t care. Rebuilding public trust will require not just restoring funding, but showing people that their voices and well-being truly matter in policymaking.

• Infrastructure and the “Invisible” Crises: Not all damage is immediately visible. Austerity forced cutbacks in maintenance and investment that are only now becoming evident. The UK’s infrastructure – from transport to energy to flood defenses – saw many projects delayed or canceled in the 2010s. Local government cuts meant less frequent road repairs (potholes became a notorious problem) and a slowdown in building new schools, hospitals, and affordable homes. These may seem like mundane issues, but over time they accumulate into a significant drag on the country’s efficiency and quality of life. Britain’s housing shortage, for example, is partly rooted in decisions during austerity to dramatically scale back capital spending on new social housing. The long-term cost is a generation locked out of the property market and sky-high rents – a structural problem that will take years to fix. Similarly, cuts to rail and bus subsidies in the 2010s hurt connectivity in regions outside London, contributing to the regional inequality that still plagues the UK. Austerity even affected human infrastructure: years of tight budgets in education and training led to teacher shortages and canceled vocational programs, which in turn affect the skills of the workforce. In essence, austerity was like starving the seeds that should have been planted for the future. The UK now faces the task of renewing an aging infrastructure and catching up on missed investments – from green energy projects to NHS hospital upgrades – tasks made more urgent (and likely more expensive) because they were neglected for a decade.

• Economic Growth and Productivity: Perhaps the biggest long-term economic impact of austerity is the hit to growth potential. Multiple studies now suggest that the UK’s GDP ended up significantly lower than it would have been without the post-2010 austerity. One recent analysis estimates that *15 years after a major austerity push, GDP can be more than 5% smaller than if no austerity had occurredbusiness.leeds.ac.ukbusiness.leeds.ac.uk】. This aligns with the UK’s experience: by 2025, the economy is smaller and people are poorer than pre-2010 forecasts anticipated. Productivity (output per worker) barely grew in the 2010s – a phenomenon economists dubbed the “productivity puzzle”. A key piece of that puzzle is likely insufficient public and private investment. Austerity created an environment of tepid demand and underinvestment, which has long-term repercussions for innovation and efficiency. Lower growth doesn’t just mean the country is poorer overall – it also means future budgets are tighter (since tax revenues are lower), ironically making it harder to reduce debt or fund services, a trap some call “austerity’s doom loop.” By undermining the drivers of growth (education, infrastructure, R&D), austerity can become a vicious cycle of low growth and constant budget pressure. Breaking out of that requires a bold change of course.

• Social Wellbeing and Cohesion: The social fabric of Britain also took a hit. Inequalities widened – not only income inequality, but regional disparities (with cuts hitting poorer northern councils harder than wealthier southern ones, for example】. The sense of a shared social contract frayed as people saw vital services disappear. Indicators like life satisfaction and mental health showed concerning trends. For instance, England saw a rise in “deaths of despair” (suicides, drug overdoses, alcohol-related deaths) during the austerity period, similar to the trends observed in the U.S. Rust Belt. Communities often felt pitted against each other for shrinking resources, undermining social cohesion. Trust in institutions – whether it’s the welfare office or the local council or even the BBC – declined among groups who felt betrayed. Austerity also disproportionately impacted the most vulnerable: children, the elderly, people with disabilities, and minorities often bore the brunt of service cuts and welfare reforms, widening pre-existing gaps in health and opportunity. It’s no surprise that by the end of the decade, the UK’s performance on various international social indices (child wellness, happiness, trust in government) had slipped. These are long-term effects that can last a generation if not addressed. When a child grows up in poverty or a community is left behind, the consequences can extend decades into the future.

In sum, austerity’s long-term legacy for the UK is one of a weaker, more divided society. It has left physical and social infrastructure in need of repair and left many citizens with a lingering sense of loss – loss of security, of opportunity, of faith in the system. Importantly, these outcomes weren’t inevitable; they were the result of political choices. And different choices can be made going forward to heal these wounds.

A Vision for an Alternative: Dignity, Sustainability, Investment

If austerity doesn’t work, what’s the alternative? The good news is that Britain (and other countries) are not condemned to repeat the mistakes of the 2010s. There is another way – an economic model focused on dignity, sustainability, and investment in people and the future. In fact, the early 2020s have already shown glimpses of a different approach, as governments opened the spending taps during the pandemic and found that robust public action can shield the economy and save lives. Moving forward, an alternative to austerity could include:

• Investing in Public Services and Infrastructure: Rather than viewing public spending as a drain, see it as an investment that yields returns. Every pound spent fixing a leaky school roof or hiring a nurse or building a broadband network is a pound that circulates back into the economy through jobs and improved productivity. An alternative approach would significantly boost spending on the NHS, schools, affordable housing, and green infrastructure – not as a temporary stimulus only, but as a sustained commitment to modernizing Britain. This would create jobs in the short term and raise the country’s productive capacity in the long term. For example, a major home-building program for public housing would not only reduce homelessness and housing benefit costs, but also stimulate the construction industry and get money flowing into local economies. Upgrading transport links, especially in neglected regions, would better connect people to jobs and spread growth more evenly (addressing the regional inequality that austerity exacerbated). Such investments pay for themselves over time by fostering a healthier, better-educated, more productive population. They also restore public faith – when people see new facilities opening instead of closing, trust grows.

• A Strong Social Safety Net Ensuring Dignity: Dignity must be a cornerstone of any post-austerity model. This means no one in a wealthy nation like the UK should be destitute or unable to afford basic needs. Policies could include adequate welfare benefits that truly cover living costs, the elimination of cruel benefit sanctions, and faster assistance for those who fall on hard times. Universal Credit, for instance, could be reformed to remove the long waits and punitive elements, or even replaced with a form of universal basic income for a more compassionate system. Guaranteeing a minimum income floor would dramatically reduce reliance on food banks and allow people to contribute to society in more meaningful ways than just struggling to survive. The alternative vision sees social support not as “handouts” but as a collective insurance we all pay into, so that when any of us face illness, unemployment, or disability, our dignity is protected. This also has economic benefits: a society where people feel secure is one where they can take entrepreneurial risks, retrain for new jobs, or care for family members without fear of losing everything. Nordic countries, for example, pair high levels of social security with dynamic economies – proving that a strong safety net and economic vibrancy can go hand in hand.

• Progressive Taxation and Fiscal Sustainability: An alternative to austerity must still be fiscally responsible in the long run – but through a fairer approach. Instead of cutting spending in ways that hurt the poor, the focus can shift to raising revenues in equitable ways and spurring growth. This might involve higher taxes on the wealthiest individuals and corporations (many of whom saw their wealth increase even during the austerity years), closing tax loopholes, and cracking down on evasion. By making sure everyone (including multinational companies) pays their fair share, the state can fund public investment without excessive borrowing. Moreover, by growing the economy (the denominator in the debt/GDP ratio), debt becomes more manageable. It’s also worth exploring innovative financing: for example, issuing long-term infrastructure bonds that take advantage of low interest rates, or empowering local authorities to raise funds for projects. The key shift in mindset is away from immediate deficit cutting towards long-term fiscal health achieved through growth and shared contribution. History shows that debts from wars or crises are best reduced not by abrupt austerity, but by steady growth and moderate inflation over many years. In practice, this means budgeting with an eye to the future: borrowing when needed to invest, and reaping the returns of that investment to stabilize finances over time. It’s the opposite of the short-term, slash-and-burn approach that defined austerity.

• Focus on Sustainability (Economic and Environmental): Sustainability in this context is two-fold. Economically, it means policies are built to last, not create boom-bust. Socially and environmentally, it means aligning economic activity with the planet’s needs and with human well-being. A post-austerity vision would invest heavily in the green economy – renewable energy, energy efficiency, clean transport – creating jobs while tackling climate change. This addresses two crises at once: the climate crisis and the jobs crisis. It’s a stark contrast to austerity, which in many cases cut funding for environmental programs (for instance, cuts to flood defenses were later blamed when severe floods hit). A sustainable approach also means supporting care work – as our society ages, investing in care for children and the elderly both creates jobs and meets vital needs. Unlike the austerity era, where care sectors were neglected, a better model values them as central to a humane economy. By making the economy greener and more caring, we also ensure that progress doesn’t come at the cost of future generations. This ties back to the true meaning of responsibility: not just balancing a spreadsheet, but leaving behind a livable world with strong institutions.

• Empowering Communities and Local Governments: Finally, an alternative model would restore power and funding to local levels, trusting communities to know their needs. The austerity years were marked by highly centralized decisions – Westminster dictating cuts across Britain. The backlash showed in places that felt voiceless. Decentralizing budgets and decision-making can lead to more innovative and tailored solutions, whether it’s a local cooperative running a bus service or city councils building social housing with local input. When people have a say in rebuilding their communities – deciding how to reopen a library as a community hub, or how to spend a neighbourhood investment fund – it renews civic pride and cohesion. Participatory budgeting and devolution of powers, combined with proper funding, would reverse the top-down approach of austerity. It treats citizens as partners in progress, not burdens to be managed. This also means re-investing in local government capacity: training and hiring the staff needed to plan and deliver projects, after years of losing skilled public servants to cuts. The overall effect would be a rejuvenation of democracy at the grassroots, as opposed to the alienation bred by distant austerity diktats.

In essence, the alternative to austerity is about building rather than cutting. It rests on the belief that a healthy society and economy comes from lifting people up, not casting them adrift. Did this approach ever work in practice? Yes – one could argue the post-1945 era, when Britain built the NHS, expanded education, constructed millions of homes, and achieved decades of rising living standards, was exactly this philosophy in action. More recently, countries like New Zealand and Scotland have pursued “well-being budgets” that prioritize social outcomes over narrow deficit targets. And the pandemic response showed that when the political will exists, government can mobilize immense resources overnight (such as the UK’s furlough scheme that protected millions of jobs) – anathema to austerity thinking.

As the UK moves beyond the austerity experiment, there is an opportunity to apply the hard lessons learned. Austerity doesn’t work – not as economics, nor as social policy. The evidence from the past decade and a half, reinforced by comparisons abroad, is that austerity was a costly mistake. The task now is to change course toward an economy that is robust and fair. By investing in people and communities, by valuing dignity and sustainability as guiding principles, Britain can begin to repair the damage and build a more resilient future. Instead of an economics of fear and scarcity – where every public service is a burden to slash – it can be an economics of hope and investment, where public money is spent as a down payment on a better tomorrow. That is the vision we must strive for: a society that is not only financially stable, but where everyone has the chance to live with dignity, opportunity, and security.

References

• Polly Toynbee & David Walker, The Guardian (Mar. 2020) – “The lost decade: the hidden story of how austerity broke Britain.” Describes how between 2010 and 2020, UK public spending cuts led to stagnant wages, rising household debt, worsened inequality, and even halted improvements in life expectanc】.

• Nuffield Trust (Dec. 2022) – “What was austerity’s toll on the NHS before the pandemic?” Explains that although the NHS budget was “ring-fenced”, funding per head flatlined after 2010, leaving no slack for investing in staff or equipment. By 2019 the NHS was under immense pressure, undermining its pandemic preparednes】.

• The Guardian (Mar. 2024) – “The Conservatives’ economic record since 2010 in 10 charts.” Provides data on UK public finances, noting the national debt rose from 64.7% of GDP in 2010 to 96.5% by 2024 despite austerity, the highest since the 1960theguardian.com】.

• Marmot Review 10 Years On (Feb. 2020) – UCL Institute of Health Equity report by Sir Michael Marmot. Found that from 2010–2020, life expectancy stagnated (and even fell for the poorest women) – a reversal unprecedented in modern times – and attributed this to austerity-driven widening health inequalitie】.

• University of York / BMJ Open study (2022) – Found that about 120,000 excess deaths in England and Wales from 2010–17 were linked to austerity-era cuts in health and social care, compared to pre-2010 trendindependent.co.ukindependent.co.uk】. Earlier studies (2017, BMJ) similarly estimated around 45,000 extra deaths in 2012–14 alone due to spending constraints.

• BMC Public Health (2023) – Academic study by Rebecca E. Bentley et al., “Mental health impact of cuts to local government spending on cultural, environmental and planning services.” Showed a 15% cut in such council services was associated with a measurable deterioration in community mental health indicator】.

• The Guardian (June 2024) – “How Britain became a food bank nation.” Reports that the number of Trussell Trust food banks grew from 35 in 2010 to 1,300 in 2019, with around 2,800 food banks in total by 2023 (more than double the number of McDonald’s). Highlights stories of child hunger and links the surge in food poverty to Universal Credit and austerity policietheguardian.comtheguardian.com】.

• The Guardian (Nov. 2017) – Open letter by 113 economists (incl. Stiglitz, Chang) titled “The chancellor must end austerity now – it is punishing an entire generation.” It notes: *“Seven years of austerity has destroyed lives… The UK has experienced its weakest recovery on record… This government has missed every one of its debt reduction targets because austerity simply doesn’t work.”theguardian.comtheguardian.com】.

• IMF Ex-Post Evaluation Report on Greece (June 2013) – Acknowledged that the Greek bailout program imposed by the troika (EU, ECB, IMF) “encountered a much deeper than expected recession with exceptionally high unemployment” and that market confidence was not restored by austerittheguardian.comtheguardian.com】. Essentially the IMF admitted underestimating austerity’s damage in Greece.

• Oxfam International (Sept. 2013) – “The True Cost of Austerity and Inequality: Ireland Case Study.” Details how austerity in Ireland cut welfare supports (unemployment benefits, child benefit), disproportionately hurt low-income groups (bottom incomes fell ~26% in 2008–2010, while top incomes rose ~8%), and warns of rising inequality and social stress despite deficit reduction succeswww-cdn.oxfam.orgwww-cdn.oxfam.org】.

• Robert Skidelsky, The Guardian (Nov. 2013) – “Post-crash economics: dispelling fallacies about austerity.” Explains the fallacy of composition in the household budget analogy and the Keynesian view that if everyone cuts spending in a downturn, the result is a shrinking economy (paradox of thrifttheguardian.comtheguardian.com】. Also notes governments are not like households because they can issue debt, and trying to all tighten belts leads to persistently weak demantheguardian.com】.

• University of Leeds Business School – Guilherme K. Martins (Feb. 2025) – Research on long-term effects of austerity. Finds that 15 years after large fiscal contraction episodes, GDP is on average 5.5% lower than it would have been without austerity, and total hours worked are about 4% lower – indicating a long-lasting economic scarring effecbusiness.leeds.ac.ukbusiness.leeds.ac.uk】.

• The Guardian (Feb. 2024) – “Rise in rough sleeping in England ‘source of national shame’, charity says.” Reports official figures that 3,898 people were recorded sleeping rough in 2023 in England, more than double (+120%) the number in 2010. Notes that rough sleeping rose in all regions, reflecting the failure to tackle homelessness, and mentions councils struggling with costs of temporary accommodatiotheguardian.comtheguardian.com】.

• The Independent (Oct. 2021) – “UK austerity since 2010 linked to tens of thousands more deaths than expected.” Coverage of studies linking austerity to increased mortality, citing UCL research estimating around 120,000 excess deaths and a University of York study linking health and social care cuts to ~57,000 additional deaths in the 2010independent.co.ukindependent.co.uk】.

• The Guardian (Mar. 2013) – “IMF admits: we failed to realise the damage austerity would do to Greece.” News article by Larry Elliott, et al., highlighting the IMF’s admission of mistakes in Greece’s austerity program, quoting Greek officials calling the austerity-induced economic spiral an “economic death spiral” that was bound to happen under such measuretheguardian.comtheguardian.com】.