What is austerity?

Austerity is a government policy of cutting public spending, raising taxes, or both, to shrink a budget deficit and slow the growth of debt. In the UK the word usually means the spending restraint that began in 2010, after the financial crisis left borrowing at record peacetime levels.

After the 2008 crash, tax receipts fell and spending on support rose. Borrowing shot up. The coalition government elected in 2010 set out to close the deficit mainly through spending cuts rather than tax rises. Many departments saw their day-to-day budgets fall in real terms for most of the 2010s. By 2009/10 the deficit had reached around 10% of GDP. Ministers argued that without action, lenders would demand higher interest rates on government debt.

Some areas were protected, such as the NHS, schools and the state pension, which grew under the triple lock. Others took deep cuts, including local councils, courts, prisons and working-age benefits. Benefit freezes and caps reduced support for many low-income families. Councils in poorer areas, which relied more on central grants, tended to lose the most per resident.

The deficit did fall over the decade. Critics argue the cuts slowed the recovery, weakened public services and hurt the poorest most. Supporters argue they restored confidence in public finances and kept borrowing costs low. Economists still debate how much austerity harmed growth. The term returns whenever a government faces tight fiscal rules and must choose between cuts, tax rises or more borrowing.

Where you've seen it

The US New Deal in the 1930s, Western economic policy from 1945 to the 1970s, and stimulus spending worldwide during the 2008 crisis and the pandemic.

In the UK today

Seen in arguments to borrow to invest in infrastructure, in pandemic support schemes like furlough, and in debates over whether cuts after 2010 slowed the recovery.