Labour Hub publishes two more responses to last week’s Budget. The first is a personal view from Dave Levy and the second is a summary of the UK Women’s Budget Group’s full response.

A budget that “needs improvement” and “exceeds expectations”

By Dave Levy

The budget headline is a £127bn deficit and current account stabilisation where the Tories had planned further reductions in expenditure. While not being willing to give Paul Mason the last word, he says, in a Medium article:

“You can quibble with details of Reeves’ plan, but it is a solid social-democratic reaction to the situation she found herself in. It looked after the workers, it taxed the bosses and the rich, it stabilised debt and left room for tens of billions of investment in the NHS, schools and homes; and it hiked the minimum wage.”

I don’t think it’s quite there, but I am on the side of those who say: it’s not too bad and could have been worse. It, in the words of most performance management systems, “exceeds expectations”, although most of those were set by themselves. There remain some unsolved problems and some risk but I think this response from Jeremy Corbyn and the Green Party in a letter to the Guardian misses the mark, it is not austerity light.

The question remains: is it enough to create the conditions to grow the economy, repair our public services and reverse the decades of underinvestment and low productivity? Simon Wren Lewis, in an article entitled, “A budget that points way but doesn’t get us very far” is not so sure, and James Meadway, in an article entitled “The budget is socialism for the rich austerity for the poor”  thinks not. The latter is concerned that insufficient is being done to decarbonise the economy.

Mason in his article also addresses the question as to whether the budget will stimulate the growth required. His key focus, though, is the political bias of the Office for Budget Responsibility, who say it won’t, and thus the theories they choose to believe and discard. I agree the OBR never had a real role; it was a piece of theatre designed to undermine the credibility of the outgoing Government and it’s time to get rid of it.

The Labour Government’s industrial strategy seems out of date to me. I have been thinking recently that while economic growth should be the centre of the policy, Labour’s thinking about growth is stuck in the past. The industrial strategy statement focuses on innovation and startups. More recent thinking suggests that outcomes which would include the outputs of repaired public services should be at least part of the aim. Additionally, some post-Keynesian thinking emphasises the need for the development of human capital as a prerequisite and driver of growth. Others including Chris Dillow question the multiplier effect of directly increased investment while everyone recognises that investment in the UK has been weak, although this is historically true for the last 150 years.

Starmer in his Financial Times article, reviewed by me here, identified energy and AI targets for investment. Again I’m unsure that the Government plans will deliver what’s required and George Monbiot questions the utility of carbon capture. At least it’s not financial services, as relied on by the Blair government.

The need to repair our public services is more than just clientelism by the Labour Party. An effective economy needs healthy and knowledgeable workers, but even this economistic analysis is being challenged. Meadway and Graeber suggest the central questions for economists have changed:

“The existing discipline is designed to solve another century’s problems. The problem of how to determine the optimal distribution of work and resources to create high levels of economic growth is simply not the same problem we are now facing: i.e., how to deal with increasing technological productivity, decreasing real demand for labor, and the effective management of care work, without also destroying the Earth.”  (David Graeber, “Against Economics”, New York Review of Books, December 2019).

On reading the reviews of Reeves’ speech, I was concerned that little was being done to encourage the growth of human capital, that is, knowledge, and if anything, policies on university and student finance and immigration look likely to damage the higher education sector which is in severe financial straits. This fear was compounded by the announcement on 4^th November of the first increase in tuition fees in eight years. This is undesirable. The failure to reverse the Tories’ rules that prohibit students bringing their families with them will impact the finances of the universities and in the case of postgraduate students impact both the institutions’ research quality and power of the international networks of British academia.

I am also concerned that nothing good is said about local government finance. Local authorities will go under, housing and education delivery will be damaged, social services and child protection services will fail. Local government is under pressure because the Tories found it easier to cut with the stroke of a pen rather than close programmes they themselves were responsible for. They also hoped that by passing the decisions onto councils, their Labour leaderships would take the blame.

I am also disappointed with the failure to implement a wealth tax and address financial inequality in British society. I am unsure how much money could be raised by a wealth tax, but the knowledge that the ultra-rich were paying their share would reduce the opposition of the less well off to their increased tax burden. There is a high correlation between economic equality and economic success.  One of Britain’s key growth inhibitors is the inequality of wealth within the economy. Tinkering with minimum wage legislation particularly given its failure to implement the TUC’s £15 per hour demand is not enough and the refusal to remove the two-child benefit cap and the decision to implement powers to spy on benefit claimants bank accounts doesn’t augur well.

I mention immigration rules as an inhibitor to the success of the university sector, but the Government’s supply-side labour market policies are also inadequate, and in fact designed to restrict immigration, not enhance the labour supply. We are an ageing society and need young people to come and work. Strong unions and minimum wage legislation are a protection against low wages and anyway, companies can move offshore if they really want to take advantage of low-wage economies.

The failure to increase fuel duty is an act of political cowardice, although one that I understand, but if climate change is reaching a tipping point, then possibly a decision that should have been taken. I was surprised at the courage of, and limited reaction to, New Labour’s ban on public smoking.

The one big silence in the speech and amongst the commentators is about Brexit. Rejoining the EU, would increase the opportunity for foreign inward investment, improve our balance of trade position which impacts growth and would allow us to reapply to the EU’s green transition and regional equality programmes. Maybe Trump’s re-election and the coming trade war will concentrate minds but Labour’s leadership is remarkably stubborn, although this budget suggests an unexpected flexibility. It also relies on some very crude power brokers who have little vision on making society a better place; it comes well behind winning and getting Government cars and red boxes.

At least, the argument, with respect to benefits, for the support for the most vulnerable in our society, that there is no alternative to cuts and that tough choices need to be made is seen to be false. They will be oppressive on benefits because they have bought into the skivers versus strivers narrative and believe it to be electorally popular.

In my eyes, the budget is an effort that meets both the “needs improvement” and “exceeds expectations” classifications.

Dave Levy is a member of Lewisham North CLP. He blogs here, where his article first appeared.

Did Rachel Reeves deliver for women? Women’s Budget Group’s Full Budget Response

Key points

• The Labour government’s first Budget in 14 years increases public spending and taxes, signalling a shift in the UK’s economic approach. While this is positive news, especially for women affected by previous cuts, the scale of past underinvestment means the boost still falls short of fully restoring public services on which women disproportionately rely on.
• The Budget moved away from austerity for public services, but the same didn’t happen for social security, offering little help for the poorest women.
• Working-age benefits will increase by 1.7% next year, less than the 2.6% projected average inflation rate for 2025/26, meaning that households receiving social security benefits will see a real-terms cut in their income.
• The two-child limit and the benefit cap, key drivers of child poverty, remain in place. 
• The overall benefit cap will be frozen from next year, as will the rate of Local Housing Allowance, which is worrying at a time when rents are rising faster than inflation.
• For Disabled women, there are particularconcerns about the Chancellor’s announcement that this Government would continue with reforms to the Work Capability Assessment (WCA) announced by the previous Government.
• Raising employer National Insurance Contributions is expected to increase costs in employing low earners, impacting essential sectors like social care and early education, which have many low-paid, mostly female workers. While the Government has allocated some funds to help public services cover these costs, other providers may face increased financial strain.
• While the increase in the National Living Wage is good news for those earning the NLW and the National Minimum Wage, mainly women, there are concerns among care providers that this will increase their costs, particularly when combined with the changes to employers’ NICs. WBG would like to see additional funding made available to enable providers of essential services to meet the costs of the increase in the NLW.
• The Women’s Budget Group will look forward to the Child Poverty Review and the Spending Review next Spring as an opportunity for the Chancellor to build on what she has started with this budget and truly create an economy that works for women.

You can find the full analysis here.

The UK Women’s Budget Group is the UK’s leading feminist economics think tank, providing evidence and analysis on women’s economic position and proposing policy alternatives for a gender-equal economy. It acts as a link between academia, the women’s voluntary sector and progressive economic think tanks.

Image: https://www.flickr.com/photos/hmtreasury/54104758648/ Creator: Lauren Hurley / DESNZ | Credit: Lauren Hurley / DESNZ Copyright: Crown copyright. Licensed under the Open Government Licence Attribution-NonCommercial-NoDerivs 2.0 Generic CC BY-NC-ND 2.0