In 2007 the global credit crisis erupted, heralding the most serious economic shock since the Wall Street crash of 1929. It was the result, according to Chossudovsky and Marshall (2010: xvi), ‘of institutional fraud and financial manipulation’. In response to the crisis, the British Labour government of the time, led by Gordon Brown (2007–10), focused on preventing the wholesale collapse of the banking sector by ‘bailing out’ the banks. In a brief resurgence of Keynesian economic theory, the Northern Rock bank was nationalised in early 2008, following a run on the bank the like of which had not been seen in Britain for over a hundred years. Other banks were partly nationalised later in the same year. The Treasury then set out on a path of addressing the budget deficit, which was preventing economic recovery and leading to rising debt and interest payments. Spending cuts aimed to reduce the deficit by half by 2014–15, with Gordon Brown insisting that cuts would not affect front-line services. However, following the 2010 general election, a Coalition government of the Conservative Party and Liberal Democrats, led by David Cameron as Prime Minister, was formed. The new Chancellor, George Osborne, set out a new target to eliminate the deficit completely by 2014–15, accelerating the pace of cuts that had been initiated under Labour and leading Britain into a new ‘age of austerity’.

Austerity and welfare reform

The legislative programme presented to the UK Parliament after the 2010 general election set out a number of major reforms to the UK social security system. Following plans set out in 21st Century Welfare (DWP 2010a) and Universal Credit: Welfare that Works (DWP 2010b), the Welfare Reform Act received royal assent on 8 March 2012. The Act represented ‘the most radical reshaping of the British welfare system since its introduction post-1945’ (Hamnett 2011: 147). As well as tackling the budget deficit, reform of the social security system was justified on the basis that it would make the system fairer, more affordable and better able to tackle ‘poverty, worklessness and welfare dependency’ (DWP 2010b: 2).