A decade after the global financial crisis, the British economy faces the risk of renewed recession due to weak growth and exposure to what the IMF has warned is a “precarious” global economic outlook.

As the UK and other countries begin to up government spending, political choices around austerity are changing.

But ‘austerity economics’ is far from dead and buried. And it’s still hardwired into policy thinking.

In a report issued today, the TUC calls for a review of the way the Bank of England and the Office for Budget Responsibility judge the impact of government spending on the economy.

‘Lessons from a decade of failed austerity’ calls for urgent changes to undo the disasters of the past decade and for a new approach to the challenging times ahead.

These changes include:

• An independent review of how the Office for Budget Responsibility and Bank of England judge the impact of government spending on the economy.

• Urgent fiscal support for aggregate demand through public sector pay increases and spending on services.

• Fast-track increases to UK public infrastructure spending to least the OECD average of 3.5% GDP.

• Increased expenditure should initially be financed by borrowing rather than increased taxation. This will strengthen the economy, leading to higher revenues that can support spending increases longer term.

• Fiscal policy should be part of a wider plan to deliver sustainable growth across the UK, including investment in the public services families rely on, the skills workers need for the future, a just transition to net zero carbon emissions, and giving workers a real voice at work.

Without this change, government action will fall far short of what is needed.

Political debate will be held hostage to the household budget fallacy and workers all over the world will continue to pay the price.

Unbroken austerity economics

Despite their warnings on the world economy, the IMF call for fiscal policy is as much a statement of austerity:

Where fiscal space exists and debt is sustainable, high‑quality fiscal policy should be used to support aggregate demand where needed.

At home, public debate cannot get away from the question ‘how will it be paid for’? And this is still answered by austerity economics. Here for example is the Institute for Fiscal Studies’ treatment of the government’s newly announced spending increases.