A Budget fit for the politics of today, but not for the problems of today

Dr Alistair Clark, Reader in Politics

The big controversy in Westminster in the run-up to the October Budget and Spending Review was the number of leaks and pre-announced spending commitments bypassing parliament in the run up to this second Budget of the year. The narrative that the government would like picked up is of an administration creating an ‘age of optimism’ with higher wages, higher productivity and investment. Thus, additional money has been allocated to the NHS, to transport in the North, to an increase in public sector pay and to the national living (formerly minimum) wage among numerous other things, almost always labelled as ‘levelling up’. Such additional spending will be welcome to those receiving it.

This narrative is wholly in keeping with a government that likes to overclaim about its ‘world class’ performance and policies. It is also in keeping with the current shift in the Conservative Party towards higher public spending in some areas. Partly this has been driven by the pandemic, and to mitigating Brexit-related problems. It is also being driven by the desire to be seen to be delivering in advance of the next general election and the need to keep on board the so-called ‘red-wall’ voters in the North that voted Conservative in 2019.

This suits Prime Minister Johnson’s bullish and spendthrift nature. Chancellor Sunak has been at pains to talk about balanced budgets, sound public finances and spending limits in the short-term, announcing a new Charter for Budget Responsibility for example in the Budget, and claiming to want to reduce taxes. Yet, presenting such a narrative of optimism and public spending does his leadership ambitions no harm. Not all Conservative MPs are happy about this current direction of travel however.  

Voters could be excused from looking beyond the headlines and spin to what is actually happening outside the SW1 political bubble. Whatever the forecasts, the economy appears to lurch from crisis to crisis. Regardless of the Chancellor’s attempt to blame many problems on international difficulties during his speech, these have not been helped by the government’s own policies.

The rise in the national living wage is undercut by inflation and a £20 per week cut to Universal Credit, together leading to a ‘cost of living crisis’ for many families. Billions ring-fenced for the NHS mean that other public services, notably local government, will likely continue to experience austerity, even if they do get some more money from the Budget. Public services in general are on their last legs. The Courts have years-long backlogs in some cases, meaning justice both delayed and denied. Education funding to catch-up post Covid-19 barely scratches the surface of what is required, whatever additional funding for children was announced in the Budget. Returning school spending to 2010 levels simply means that school spending has stagnated for over a decade. The same could be said about many of the other spending announcements in the Budget.

Add the social care crisis, fuel and lorry driver crises and numerous other issues. Tens of billions have been paid to private contractors for ‘test and trace’ during the Covid-19 pandemic, with often no obvious return and negligible scrutiny. Some of that vast amount of public money might have been used, for instance, to resolve issues in education, justice and social care. Meanwhile, the COP26 Summit brings to Britain’s doorstep a world, literally in some cases, burning and suffering because of climate change, while Chancellor Sunak reduces Air Passenger Duty for domestic flights and scraps a planned fuel duty rise.

Look behind the spin and this, then, seems a budget which may be in tune with the politics of today in Britain, but which will do little to resolve many intractable real-world problems.

‘Levelling up’ needs genuine commitment to addressing a wide range of issues

Dr Louise Kempton, Associate Dean (Research and Innovation), Professor Danny MacKinnon, Director of CURDS, and Professor Andy Pike

While any new investment is to be welcomed our research shows that the persistent and widening disparities between places in the UK are deep-rooted, long-term and structural. Achieving ‘levelling up’ needs genuine commitment to addressing a wide range of issues, including the social and economic determinants of health inequalities, early years education as well as adult skills, uneven investments in research and innovation, local resilience and re-building social and economic as well as physical infrastructure. 

This requires transformational levels of investment and new forms of decentralised governance that need to go far beyond the modest announcements made in the Budget if ‘levelling up’ is to become anything more than a hollow slogan.

Is the headline figure of £850m simply an appeasing panacea?

Professor Vee Pollock, Dean of Culture and the Creative Arts

Government support for the cultural sector by way of funding for cultural institutions, the doubling of tax relief, and support to scale up SMEs are welcome measures, particularly as the sector contends with the weighty impact Covid-19 has had and begins working toward a very different future.

That said, we have to question whether the headline figure of £850million is simply an appeasing panacea. Some of this represents previously committed funds and there is enough evidence now to determine where the real areas of challenge that require additional investment are (the Centre for Cultural Value based at the University of Leeds is leading much of this work in partnership with the sector) – as those who run venues appreciate, the cultural ecology reaches far beyond their walls. For example, we know that the impact of Covid-19 on freelancers and those under 25 has been significant and that Covid19 is likely to have exacerbated existing inequalities, and yet we have not seen effective measures to enable this to be addressed.

Crucially, government policy is decimating the skills pipeline for our cultural industries and raising questions about the value of arts and humanities education, so we run the risk of having fantastic ‘culture and heritage hotspots’ without the core content and skills to sustain our world-leading cultural sector, and to support innovation in our economy more broadly. 

'News management has been taken to new levels, to the great irritation of Speaker Hoyle'

Dr Martin Farr, Senior Lecturer in Contemporary British History

As soon as the Chancellor finished speaking the Office for Budget Responsibility revealed what had been leaked: that the permanent effects of the pandemic – ‘scarring’ – are less than originally feared. As was hoped at the time, 2020’s was a clinically-engineered recession, with demand merely in abeyance. Growth forecasts are almost doubled, to pre-Covid levels by 2022. And growth is to the economy as vaccinations are for the pandemic. And as both are to the government.

And yet, surveying this Budget and three-year Spending Review – more the latter than the former – it remains hard to recollect a government faced with greater challenges, or a Prime Minister about whom there were greater doubts as to their likelihood of meeting them.

To the significant, largely deleterious (at least in the short-term), consequences of Brexit in 2020, came the pandemic. A historian may see this as being the reconstruction.

The pandemic in 2020 was not dissimilar to the scale of the war in 1940. The state in 2021 is at its largest size, as a share of GDP, since 1945. The experience of 1945, and that of all polling since the pandemic began, is that the extension of the state has usually been popular with voters.

In 1918 there was a general election immediately after the war, and the new government went about retrenching and cutting back on what the state had improvised during it. In 1945 there was a general election immediately after the war but the new government consecrated what the state had improvised during it. It remained largely intact until the Thatcher governments.

The parliamentary Conservative party – those who determine who leads the government – is a broader coalition than it has ever been, and is torn between a ‘1918’ and a ‘1945’ disposition. Most of those from the north and midlands – from those seats that had voted Labour from 1918 until 2019 – want the bigger state to persist; more conventional Conservatives, from the south, prefer the exigencies of the pandemic to be just that: temporary. The tax take is today the highest since 1948, not something Thatcher's children came into politics to engineer.

To manage this is an uncommonly popular, and politically precociously adroit, Chancellor of the Exchequer. Popularity in ordinary times would confer great personal authority to him in his dealings with the Prime Minister, but the Conservatives won a significant majority in 2019 on that Prime Minister's own popularity. But Conservative MPs are as unsentimental as Boris Johnson is boosterish. Their expectation will be tax cuts next year as the government prepares for a general election.

News management has been taken to new levels, to the great irritation of Speaker Hoyle. The pre-Budget leaking of positives – VAT cut on energy bills, an above-inflation increase in the National Living Wage, lift freeze on public pay public sector pay, minimum wage – raised suspicions that the government had rejected ‘austerity’. There have been £40bn of tax increases this year already. But borrowing to stimulate growth, as President Biden is seeking to achieve, has been rejected (borrowing will fall from 7.9% now to 3.3% next year, and 1.5% in 2023); contrary to what might have been expected, as in 2008 after the financial crash the US response to an economic crisis was more Keynesian than was that of the UK.

Inflation and a cut in Universal Credit (or at least the ending of a temporary increase) is eroding living standards into a perfect storm cost of living crisis at the same time as the vaunting of a high-wage economy. Today's cut in the taper rate of 8% signals the government's awareness of that crisis as both an economic – and political – reality.

One doesn’t need to be the Shadow Chancellor – standing in for a Covid-infected Leader of the Opposition – to invoke the list: inflation up, interest rates up, debt servicing costs up, energy bills up, rents up, petrol up, food prices up, national insurance levy up, council tax up. And labour shortages. And a massive gap in educational attainment the consequences of which will be felt for decades.

Courts and prisons need more (received £2.2bn today), schools need more (£2bn today), Further Education still needs more, the NHS needs more, social care needs more, prisons need more; all far above and beyond what they would ordinarily hope for, and that was before the Chancellor’s new ceiling on future spending.

There is £1.7bn investment in ‘levelling up’ (£7bn more in transport projects). The Health and Social Care Levy – a huge injection of £6bn – will only return the NHS to pre-pandemic waiting lists. And public sector pay increases are to be funded from existing, departmental budgets (plus 5% efficiency savings).

With Brexit, and then Covid, it has for some time been plausible to speak of unprecedented political challenges; now they include economic. The pandemic was the easy bit. Britain now faces a new, grim, precedent: a Covid and influenza winter (last year’s being free of the latter because of the former).

There is a long history of overly-optimistic comments from Chancellors of the Exchequer. When Sunak spoke of “a new age of optimism”, it was at the risk of adding to them.

Investment in skills, an investment in growth

Professor René Koglbauer, Dean of Lifelong Learning and Professional Practice

The word ‘skills’ falls definitely into the category of ‘high-frequency words’ of this Autumn Budget 2021. Many of the skills focused funding announcements, which have seen an unprecedented increase of 26% in real terms, build on and give assurances to initiatives announced in the March Budget. Examples of this include a considerable increase in adult skills funding ensuring continued and increased free access for adults to Level 3 retraining courses, the scale up of skills bootcamps (some of these are intended to train up to 5,000 HGV drivers), or the extension of the £3,000 incentive for employers hiring apprentices.

Without doubt the commitment by the government to further support non-apprenticeship levy employers by contributing 95% towards the apprenticeship training costs and their flexible apprenticeship model alongside the proposed enhanced recruitment service will be welcomed by many SMEs, creative industries, and training providers. Additional funds committed to the 16-19 education T-level provision and the Institutes of Technology are – unsurprisingly – investments into these government’s flagship skills initiatives. These together with the new Multiply programme to improve numeracy skills amongst adults are perceived vehicles of addressing the levelling up challenges.  

While forecasted spending on skills - and indeed education more generally - sees a significant real term increase in comparison to 2019-20, it is in line with education spending a decade ago. The question therefore arises that if education spending had been increased steadily over the last decade would we have been able to address shortcomings such as numeracy skills systemically rather than through shorter-term reactionary measures? To make the most impact of these additional funds, all stakeholders, including employers, career advisors, training providers, local, regional and national government authorities and professional and industry bodies will have to work collaboratively in promoting these skills development opportunities to the intended audience and bringing those on board, who may currently not see the benefits of up-/re-skilling and what that could do for them and their families.

It is worth noting, that an additional £500 million from investments in the social care system has been earmarked for skills development and well-being of employees in this sector.

Lack of intervention to address increase in energy bills is disappointing

Dr David Greenwood, NU Academic Track Fellow

The commitment to warmer buildings is key to achieving net-zero, and is complimentary to efforts to reduce the cost of heat pumps, which need well insulated buildings to be cost effective. However, the implementation of this will need to be much better than the shambolic Green Homes Grant last year.

The funds for hydrogen are also very welcome, since this is likely to be a key technology for making the best use of renewable energy as well as a replacement for natural gas in some contexts.

The lack of any direct intervention to address recent increases in energy bills and bankruptcy of energy suppliers is disappointing. The commitments to decarbonisation of the power sector are all subject to security of supply. This is of course an important concern, but efforts should go into understanding how to run a net-zero system with security of supply, rather than using it as an excuse for failing to deliver on the net-zero ambition. New investment in both large and small nuclear could help to solve this issue, but there are big challenges around operation of nuclear power in a system which has large volumes of renewable generation, potentially preventing nuclear power plants from operating continuously, which is required for them to deliver value for money.

Finally, the commitment to CCUS is positive, but this is an area in which progress has been very slow, and it shouldn’t be used to maintain the reliance on fossil fuels rather than moving to truly low carbon energy sources.

Return to sport key for Covid-19 recovery

Katy Storie, Director of Sport

Key to Covid-19 recovery within the community is the return to sport for all ages and at all levels. The sector has been particularly negatively impacted by the pandemic and this investment will support participation in physical activity, working to build back to pre-covid levels. This is much needed by the significant groups of young people who have had 18-months without access to much of the positive benefits that sport offers.