As some vital services collapse and visibly reveal the impact of political decisions on communities, the super wealthy get richer, and the rest of us face the impact of scenes like this.
Birmingham. These issues don’t happen overnight. What’s happening? pic.twitter.com/e8GW7sl6Cm
— Oliver Laurence – 🇬🇧 Police & Crime Commentator (@Protect_ServeUK) March 11, 2025
The Impact of 14 Years of Austerity on the UK
Since the global financial crisis of 2008, the United Kingdom has undergone a profound transformation in its economic and social landscape, driven largely by the implementation of austerity measures. For 14 years, successive governments have pursued policies aimed at reducing public spending, cutting deficits, and shrinking the state. While proponents argue that austerity was necessary to stabilise the economy, its long-term impact has been deeply divisive, leaving a legacy of strained public services, widening inequality, and a nation grappling with the social and economic consequences. At the heart of this story lies the catalyst for austerity: the unprecedented use of quantitative easing (QE) to prop up the banking system in the aftermath of the financial crash. Meanwhile, as public services were cut and wages stagnated, the super-wealthy saw their fortunes grow, exacerbating the gap between the richest and the rest.
The Origins of Austerity: Quantitative Easing and the Banking Crisis
The 2008 financial crisis exposed the fragility of the global banking system, and the UK was no exception. Major banks, including Royal Bank of Scotland (RBS) and Lloyds, faced collapse, threatening to bring down the entire economy. In response, the Labour government, under Prime Minister Gordon Brown and Chancellor Alistair Darling, took drastic action. They bailed out the banks with billions of pounds of taxpayer money and introduced quantitative easing—a policy whereby the Bank of England created new money to purchase government bonds and other financial assets. The aim was to inject liquidity into the financial system, stabilise banks, and encourage lending.
Between 2009 and 2012, the Bank of England pumped £375 billion into the economy through QE. While this prevented a complete financial meltdown, it also had significant unintended consequences. QE inflated asset prices, particularly housing and stocks, benefiting those who already owned assets while doing little to stimulate the real economy or support ordinary households. Meanwhile, the government’s debt ballooned as a result of the bank bailouts and the economic downturn, creating the conditions for austerity to be framed as a necessary response.
When the Conservative-Liberal Democrat coalition government came to power in 2010, they inherited a fragile economy and a deficit that had soared to over 11% of GDP. Chancellor George Osborne argued that drastic cuts to public spending were essential to restore fiscal credibility and avoid a sovereign debt crisis. Austerity, therefore, became the defining policy of the next decade, with its roots firmly in the aftermath of the banking crisis and the QE measures that followed.
The Human Cost
The impact of austerity on public services has been severe. The NHS, once a source of national pride, has faced unprecedented strain. Real-terms funding cuts, coupled with rising demand, have led to longer waiting times, staff shortages, and a growing reliance on temporary solutions such as agency workers. Similarly, social care services have been decimated, leaving vulnerable elderly and disabled individuals without adequate support.
Local government budgets have also borne the brunt of austerity, with councils across the country forced to cut essential services such as libraries, youth centres, and waste collection. According to the Institute for Fiscal Studies, spending on local services fell by nearly 25% between 2010 and 2020. This has had a disproportionate impact on poorer areas, exacerbating regional inequalities.
Education has not been spared either. While funding for schools was initially protected, real-terms per-pupil spending has fallen significantly since 2015. Teachers have faced pay freezes, and many schools have been forced to cut back on resources, extracurricular activities, and support staff. The impact on children, particularly those from disadvantaged backgrounds, has been profound, with widening attainment gaps and reduced opportunities.
Rising Inequality and Poverty
Austerity has deepened inequality across the UK. Cuts to welfare benefits, including the controversial introduction of Universal Credit, have hit the poorest households hardest. The two-child limit on benefits, the bedroom tax, and the freeze on working-age benefits have pushed many families into poverty. According to the Joseph Rowntree Foundation, over 14 million people in the UK were living in poverty in 2022, with child poverty reaching record levels.
The rise in food bank usage is perhaps the most visible symbol of austerity’s impact. The Trussell Trust, which operates a network of food banks across the country, reported a 74% increase in food parcels distributed between 2015 and 2020. For many, this has become a lifeline in the face of stagnant wages, rising living costs, and inadequate social safety nets.
The Super-Wealthy Get Richer
While austerity squeezed public services and pushed millions into poverty, the super-wealthy saw their fortunes grow significantly. The policies of QE and low interest rates, designed to stabilise the economy after the financial crisis, had the unintended effect of inflating asset prices. This disproportionately benefitted the wealthiest, who own the majority of financial assets such as stocks, bonds, and property.
According to the Sunday Times Rich List, the combined wealth of the UK’s 1,000 richest individuals increased from £258 billion in 2009 to £597 billion in 2019, a staggering rise of 131% over a decade. By 2023, this figure had reached £710 billion, despite the economic shocks of the COVID-19 pandemic and the cost-of-living crisis. In contrast, median household incomes grew by just 8% in real terms between 2010 and 2020, according to the Office for National Statistics (ONS).
The wealthiest 1% of households in the UK now own more than 20% of the country’s total wealth, while the poorest 50% own just 9%. This growing wealth gap has been fuelled by rising property prices, booming stock markets, and tax policies that favour capital over labour. For example, cuts to corporation tax and capital gains tax have benefited wealthy investors, while cuts to public services and welfare have disproportionately affected low-income households.
Economic Stagnation
While austerity was intended to spur economic growth by reducing debt and restoring confidence, its impact on the economy has been mixed at best. The UK experienced one of the slowest recoveries from the financial crisis among advanced economies, with GDP per capita barely surpassing its pre-2008 level by 2016. Wage growth stagnated, and productivity remained sluggish, leading some economists to argue that austerity stifled rather than stimulated recovery.
The COVID-19 pandemic further exposed the fragility of the UK’s economic foundations. Years of underinvestment in public health and social infrastructure left the country ill-prepared to respond to the crisis. The government was forced to abandon its austerity playbook, borrowing heavily to fund furlough schemes, business support, and public health measures. This sudden shift in policy highlighted the limitations of austerity as a long-term economic strategy.
A Divided Nation
Beyond the economic and social impacts, austerity has also contributed to a sense of division and disillusionment across the UK. The Brexit referendum in 2016, which saw a small majority of voters opt to leave the European Union, was in part a reflection of the discontent felt by many in communities that had been left behind by years of cuts and economic stagnation. The vote exposed deep fault lines between regions, generations, and social classes, many of which can be traced back to the uneven impact of austerity. The irony is that so far the impact of the vote has been to deepen the impact and the wounds.
The Road Ahead
As the UK emerges from the pandemic and faces new challenges such as the cost-of-living crisis, the legacy of austerity continues to loom large. While the current government has signalled a shift away from austerity rhetoric, with promises of increased spending on health, education, and infrastructure, the scars of the past 14 years will take time to heal.
The debate over austerity remains as contentious as ever. Supporters argue that it was a necessary evil to restore fiscal discipline, while critics contend that it was a political choice that prioritised deficit reduction over the wellbeing of citizens. What is clear is that the impact of austerity has been far-reaching, reshaping the UK in ways that will be felt for generations to come.
In the end, the story of austerity is not just one of numbers and budgets but of people and communities. It is a story of resilience in the face of hardship, but also of missed opportunities and unfulfilled potential. As the UK looks to the future, the lessons of the past 14 years must not be forgotten, starting with the recognition that the decisions made in the wake of the 2008 crisis, including the reliance on QE to prop up the banks, set the stage for a decade of austerity that has left deep and lasting scars. Meanwhile, the growing wealth of the super-rich serves as a stark reminder of the unequal distribution of the costs and benefits of these policies.
