A TOP economist has criticised Labour austerity cuts, insisting that their apparent savings will eventually cost the country more in the long-run.
Mariana Mazzucato, a professor in the economics of innovation and public value from University College London, warned on the BBC’s Question Time that Labour’s decision to make cuts to the Winter Fuel Payment may not save them money at all as pensioners could end up hospitalised from being unable to heat their homes.
Labour have claimed making the payment means-tested will save about £1.3 billion this year and £1.5bn in subsequent years, but the move has been slated across the political spectrum amid an impending hike to the energy price cap.
Mazzucato told the Question Time audience: “Simply coming in and then saying we need to cut in order to reduce that hole, my view is that potentially that hole only becomes bigger. Why? Because the cost of inaction is greater than the cost of action.
“If you are actually cutting areas like the winter fuel [payment] that then perhaps makes the people who are not receiving their winter fuel - and there’s lots of pensioners who will not – get sick, and they end up in hospital, [and] there’s a cost there.
“And so any sort of modelling or analysis of whether this was the right thing to do to save £1bn has to be taking a long-run view.
👏 “The cost of inaction is greater than the cost of action” Top economist Mariana Mazzucato explains why Labour austerity cuts, including taking the Winter Fuel Payment from millions of pensioners, are damaging & counterproductive. The best way to growth is investment.#bbcqt pic.twitter.com/Ayh3sP7Vmd
— Olaf Stando 🌻 (@OlafSNP) September 19, 2024
“This is always true. Anytime we make a cut, it looks like it’s a cut and it looks like it might be a saving, but in so many different instances we see that actually that ends up costing the economy much more because of what it actually does to the social fabric, to the health and wellbeing of people.”
When host Fiona Bruce suggested you still needed to find money upfront in order to avoid cuts, Mazzucato disagreed as she detailed how “governments aren’t households”.
She went on: “As a person you would have to do that, but governments always create money.”
Bruce then interrupted saying: “By borrowing or raising taxes?”
“By borrowing of course,” Mazzucato responded.
“Well, you could do both, but the point is you don’t just want helicopter money and spending for spending’s sake.
“If you’re actually spending in anything that kind of expands the productive capacity of the economy, but also health and wellbeing, of people, ultimately that will increase productivity, it will increase growth.”
Mazzucato was one of the signatories of a letter published in the Financial Times earlier this week which warned plans to slash public investment in the October Budget would continue to “damage the foundations of the economy and undermine the UK’s long-term fiscal sustainability”.
