Austerity rests on a thesis the government doesn’t believe in

[Co-authored with Tom Hunt]

Remember expansionary fiscal contraction? You don’t hear much about it today, but back in 2010 when George Osborne set out his austerity agenda, the theory underpinning it was that the private sector would expand to fill the gaps caused by public cutbacks.

The notion that too much public investment was ‘crowding out private endeavour’ was duly cited approvingly in George Osborne’s emergency budget of June 2010. An analysis of what austerity actually looks like across the English regions suggests, however, that the Conservative Party have in government been quite content to use the public finances to enable private endeavour.

In the latest SPERI British Political Economy Brief, Public Infrastructure Investment and Business Activity in the English Regions, we consider a key area of government spending, infrastructure investment, and assessed its relationship with private sector business activity on a regional basis.

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