“A new economy?” – we need less blah-blah-blah and more action!

“A new economy?” – we need less blah-blah-blah and more action!

Rishi Sunak presents his Budget today – promising ‘A new post CoVid Economy’.

Jane Darling, our CLP Policy officer takes a shot at pre-delivery commentary here –
we’ll be adding more once details are published and our team have had a good look behind the smoke and mirrors…

The Budget 2021 

On 7th September, the Chancellor, Rishi Sunak, launched his Spending Review. This will conclude on 27 October when he delivers the Autumn Budget setting out the spending for government departments and the devolved administrations for this Parliament. It is a 3-year review covering the financial years until the end of March 2025.

According to HM Treasury (7 September2021),the government will set out how it intends to “Build Back Better”, delivering what it sees as the priorities of the British people, continuing to support businesses and jobs through:

  • “Ensuring strong and innovative public services – making people’s lives better across the country by investing in the NHS, education, the criminal justice system and housing;
  • Levelling up across the UK to increase and spread opportunity; unleash the potential of places by improving outcomes UK-wide where they lag and working closely with local leaders; and strengthen the private sector where it is weak;
  • Leading the transition to Net Zero across the country and more globally;
  • Advancing Global Britain and seizing the opportunities of EU Exit;
  • Delivering our Plan for Growth – delivering on our ambitious plans for an infrastructure and innovation revolution and cementing the UK as a scientific superpower, working in close partnership with the private sector.”

If you didn’t know any better, you might think these pledges were written by a Treasury which had only just come into power. Yes, we have an ongoing pandemic which continues to devastat many lives and halt, or severely disrupt the progress of enormous numbers of people, not least among them, the children and young people of this country.

Yes, the climate change situation is looking more and more desperate as we edge ever closer to seeing the last grains of sand running through the timer, and we begin to see the full effects of our profligacy with the earth’s, as we now know, finite capacity to support our insatiable demands.

The Government is very apt to lay the blame for the need to Build Back Better at the doors of these two phenomena. The fact remains that many of the problems in our economy result from the fiscal policies of the Conservative, and coalition governments which have held the Treasury reins since 2010, two years after the dramatic financial crash which was largely brought about by irresponsible and greedy bankers in Britain and other countries. 

Following on from that world-wide recession, Britain was plunged into a period of austerity with  the government’s mantra that we had to pay down the debt, run up to more or less 100% of Gross Domestic Product (GDP),as a result of the crash constantly ringing in our ears. Damaging cuts to public spending and investment followed, leaving local authorities and government departments threadbare. Reductions in staffing, and resources, lack of maintenance of schools, hospitals etc, cut-backs to early years provision, closure of many Sure Start Centres, cut backs to policing, prison officer numbers, “rationalisation” of all sorts of governmental and local authority departments, in order to save money, were undertaken.

Meanwhile, the poor got poorer and the rich got richer. Inequality in Britain has increased.Life expectancy has stalled: the gap between poor areas and better off areas in one town can be as much as 6 years. This is indeed the case in Folkestone and Hythe: those who live in Sandgate can expect to live 6 years longer than those in the centre of Folkestone. The pandemic has provided some great business opportunities for some already wealthy people. Whilst some of our less well-off citizens were devoting time and energy to help those who needed extra support, others were capitalising on the situation, making huge profits from government contracts. 

Boris Johnson trumpets about levelling up. Very few people seem to understand what it means and there is very little evidence that the fundamental structures in our society which need to work together to formulate a plan to address why we actually need to do any levelling up are being given the opportunity to do so. In the Guardian newspaper on 25 October, John Harris reports from Burnley to find out about their experience of levelling up. He concludes with a quote from the Labour Leader on the borough council. “…when we talk about levelling up……well, what we actually want are things that they took away”.

Interestingly, on the Andrew Marr Show on Sunday (BBC1 9am 24 October), Rishi Sunak stated that he wanted to help poor working families. No mention was made of the poor families who are do not have anyone able to work for genuine reasons of health or caring responsibilities.

From Richard Partington Economics correspondent for the Guardian

Wed 5 Sep 2018 

The Institute for Public Policy Research (IPPR) commission on economic justice recommends an overhaul of the UK economy, with greater fairness one of the key aims. Here is a summary of levels of inequality in the UK and the policies that have been deployed to address them over the past decade.

What are current levels of inequality in the UK?
8yThe picture of rising inequality across modern Britain revealed by the commission’s report shows the financial health of nation is divided along the lines of income, geography, gender, ethnicity and age. It ranks the UK as the fifth most unequal country in Europe.

More than a fifth of the population live on incomes below the poverty line after housing costs are taken into account, even though most of these households are in work. Nearly one in three children live in poverty and the use of food banks is rising.

There is a sixfold difference between the income of the top 20% of households and those of the bottom 20%. Wealth inequality is much worse, with 44% of the UK’s wealth owned by just 10% of the population, five times the total wealth held by the poorest half.

Some economists who sit on the righthand side of the political spectrum argue that inequality is the price of economic growth, and that when the better-off in society flourish, those at the bottom do also from the so-called trickle-down effect.

However, the International Monetary Fund, which specialises in rescuing troubled economies, has warned that countries with greater levels of income and wealth inequality are inherently less stable. When the rich channel their savings into property and financial assets, an economy can become more volatile – as seen in the run-up to the financial crisis.

Inequality of income and opportunity can prevent people from positively contributing to the economy, holding back economic growth and the overall development of the nation. Low pay can damage productivity, or the amount of economic output generated per hour worked, according to the commission’s report. At the same time, higher levels of inequality can lead more people into debt and into poor health, which in turn can drive up longer-term spending costs and damage the public finances.

It would appear, that despite the abundant evidence supplied over the last 100 years or so from many expert economists, sociologists, psychologists, medical professors and educators about the detrimental effects to the functioning of a nation, our government remains unprepared to fundamentally rebalance our economy in favour of creating a more equal society. This may be because their main aim is to keep the wealth of our nation, the 5th richest in the world, in the hands of the few who pay the Conservative Party through the donation scheme, to maintain the status quo.

No wonder Rishi Sunak, like his predecessors does not want to rock the boat by raising taxes. But, to the surprise of many, he has just done so. However, who is going to be made worse off? In the main, the PAYE taxpayer who has no choice whether to pay tax or not, and, if a public service worker has their pay frozen. In the meantime, those who are self-employed can choose how much income they decide to declare, and those who can afford to employ an astute accountant  ensure that they pay as little as they can get away with. 

When questioned why the Treasury does not go after tax avoiders the reply was that it’s too difficult to bring a case against avoiders and the rewards are too small. Of course it’s difficult. After all, those astute accountants are the ones who design into our tax laws, the loopholes through which the tax can be squirreled away into an off-shore account. 

In the Guardian newspaper today (25 October) there is a report that 30 billionaires want to pay higher taxes, saying that they want Sunak to “address the economic imbalance of the current tax system which places and deeply unequal burden on working people”. The PM and the Chancellor have apparently dismissed the idea.

The ordinary tax payer is subsidising business who pay less than the minimum wage to their employees because their low wages have to be topped up with benefits. Between 2011 and 2018, 191 companies failed to pay £2.1m to over 34,000 workers, thereby breaking National Minimum Wage law.

Rishi Sunak must have been running himself ragged putting this budget together, as he attempts to keep everyone happy about his spending plans. On the one hand there are the free marketeers, those who want to shrink the state; on the other are the more compassionate Tories who can understand that the £20pw lost be those on Universal Credit cannot just be made up by working another 2 hours a week, as suggested by the Minster for Work and Pensions, Therese Coffey. Then there are those who think the Environment is an important issue and we should be supporting green initiatives, creating more wind farms, building batteries for electric cars, thus creating more jobs. Then there are those who are sceptical about the whole idea of climate change, which, in any case is not going to affect them as they can always jet off to some relatively unaffected part of the world. However, taxes could be raised from businesses who create a huge amount of plastic waste which pollutes the land and sea. We could stop spending money and further polluting world by shipping our waste to other countries like China.

There are so many competing demands for money: needed to create a Social Care Service, to cut the NHS waiting lists, to finance the schools catch up programme, to invest in scientific research, to building more homes, to finish HS2 and to support other transport initiatives, road building, to replace the unsafe cladding of buildings, to name a few. And,of course we must not forget to learn the lessons of the past and make sure that we stock up on preparations for another pandemic.

Not only that, but the Chancellor, whilst he is doing his juggling act, keeping the plates spinning in the air, has to try to stop Johnson behaving like Boris, the clown whose circus act is to fire promises of goodies from a scatter gun aimed in any direction which he thinks will increase his popularity. It seems clear that they have opposing views on the economy, so instead of being able to work together in a collaborative, co-hesive way, they will continue to be at odds. Their rivalry may do damage. 

The trouble is that there doesn’t seem to be a strategic, comprehensive plan to fix all the problems this country has. Sunak is busy sticking fingers in holes in the dyke, but all the time the water is rising and the dyke is in danger of being washed away. He says that we don’t have any money. There are British people sitting on piles of it, that’s if they haven’t already stashed it away off-shore. Is this OK? Is it fair for those who are least able are proportionately contributing to the Treasury’s income, whilst bearing the brunt of cost of living rises whilst fuel, energy, food and other basic commodities become more and more expensive, and parents are forced to choose between feeding their children and turning on the heating. 

The latest news as of 25 October is that the national living wage has gone up by about 60p an hour and the public pay freeze has been lifted. However, we will have to wait and see whether inflation will completely negate rises to the minimum wage and any public sector pay rises.

It seems to me that we are in a similar position to that of being at war. The forces of climate change have been advancing all our lives, the pandemic has, and continues to damage us and  are beginning to feel the detrimental effects of the hard Brexit deal (which, of course, goes unmentioned by the government). In the war there was a coalition across government. Plans for a better future for all the people of Britain were made and carried out. The NHS was born, a new education system and new schools were built, and millions of local authority homes were built. Vast amounts of money were borrowed to pay for all this, and the government led the people giving clear guidance which necessarily interfered in many areas of their lives, as they catered for the needs of all and put safety first. After the war taxes went up in order to reduce the debt which reached approximately 250% of GDP and rationing continued. People were made to feel they all had a part to play.

Maybe we should take the position that we are in a war now – that we have to join together to fight for the future of our planet – our future as a more equal global and British society, and for the future of the generations to come

These are the issues this budget should be based upon, not empty promises about being the best in the world. At this, never more crucial time, we need a government which has the moral compass, serious ambition and political will to put our planet and the needs of all of our people here and across the world, first. As Greta Thunberg put it, let’s have less meaningless “blah, blah, blah” and more radical, meaningful action.

Jane Darling 

Policy Officer – Folkestone and Hythe Labour Party

25/26 October 2021

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