What a budget for shared prosperity needs
5 March 2021
The Institute for Global Prosperity’s (IGP) views on what the Budget 2021 should have done to Rebuild Prosperity for the 21st Century
A Conversation for Change
The IGP is a world-leading academic institution with a mission to rethink what prosperity means for people around the globe, to help build a prosperous, sustainable, and global future underpinned by principles of fairness and justice. In light of the Covid-19 pandemic, rebuilding prosperity for the 21st century requires new innovative ways to ‘level up’ the economy and ‘build back better’. The UK and the rest of the world face global challenges that will deeply impact the poorest people and places on an intra-regional scale. We face a global recession with rising unemployment, a climate crisis, and exacerbated structural inequalities which require immediate action.
We call on the Government to reset its current thinking in tackling these issues by placing shared prosperity of people and planet at the centre of its recovery strategy, rather than continually relying on GDP, productivity and economic growth which give a false sense of security to the challenges faced by communities and local areas.
The IGP is calling for a new conversation on Rebuilding Prosperity for the 21st Century, and for the Chancellor of the Exchequer to actively engage with five proposals that will lead to greater shared prosperity and improvements in quality of life for people across the country, by implementing the following recommendations:
1) Ensuring secure livelihoods for all – as the central aim of the Covid-19 recovery planning and the ‘levelling up’ agenda and not solely focusing on job creation. This involves investing in social infrastructures, such as affordable and good-quality housing, adult and child care, the environment, a proper reshaping of our welfare system, a consistent industrial strategy, a rethink of the education system and its policies, increased fiscal capacity for local government, and for a focus on the sustainability of today’s society for future generations.
2) Implementing Universal Basic Services (UBS) – free provision of public services such as the internet (digital), food, housing, and transport within communities, to enable all citizens to have access and control over a shared infrastructure of public services. The benefits of UBS will be a significant fall in people’s cost of living, a welcome relief for our poorest regions who have experienced rising living costs even prior to the pandemic, and improvements in wellbeing in ways that are effective, inclusive, and sustainable. UBS plays an important role in achieving secure livelihoods.
3) Creating citizen-led Prosperity Indices – as a means to capture local priorities and to better understand the meso (community) level, in order to form a direct link to policy-making. This is based on the theory that new kinds of shared knowledge will drive social innovation and result in real change at the local level by creating: new collaborative partnerships, better policy formulation, increased policy effectiveness and greater trust and capacity in democracy which has been eroded in the past years.
4) Bring people into policy-making– addressing the ‘democratic deficit’ defined as the absence or lack of local people and communities involved in the policy-making and decision-making processes that impact their everyday lives. Therefore, creating prosperity measures and policies that reflect the lived experiences of people and recognising the ‘place’ where an individual's lived socio-economic realities become interlinked with the structural determinants of the UK economy is key. By fostering wider engagement and putting people at the forefront of policy, we aim to move towards a decentralised, bottom-up approach as part of a really inclusive policy strategy.
5) Setting up collaborative platforms to enable citizen-led innovation across the UK – creating meaningful structures and partnerships that allow and encourage collaboration amongst citizens, local government, businesses, and community organisations. This will shift the agenda to addressing local needs and local priorities leading to effective decision making and a greater capacity to test out new approaches which can be used to rapidly evaluate change at the meso level. Localising the approach to policy provides the basis for communities, people, and places to flourish.
The recently discarded Industrial Strategy leaves a big hole in government policy with our innovation districts failing to materialise and large infrastructure projects aimed at regional convergence having minimal meaning and value to people and communities. Equally, successive governments have neglected social infrastructure and questions of care that need urgent repair and attention. Implementing the above policies is a means of facing up to the challenges the UK economy will face by creating an economy of belonging that works for everyone.
The Chancellor spoke of “levelling up” several times during his speech, focusing on how areas and communities that feel left-behind can ‘catch-up’. However, the agenda of ‘catching up’ cannot be limited to moving government departments out of London, such as the announcement of Darlington as the home of the new Treasury North campus and new freeports in Humber, Teesside, and Liverpool. Lord Sainsbury raised an important point regarding the budget as he stated in a recent talk at the Centre for Cities, “moving civil servants may have symbolic importance but won’t level up the country”. The IGP would like the government to instead begin with enhancing the participation of individuals and communities in processes of change rather than how they might ‘catch-up’.
The Chancellor stated he will do “whatever it takes” to help the economy recover from Covid which has led to huge unemployment and a significant contraction of the economy. As expected, the Chancellor announced an array of measures to tackle the pandemic using the “full measure of our fiscal firepower” and promised to protect livelihoods across the UK. On the other hand, he set out to “level with the British people” and “be honest about challenges facing the country” and set out “three fiscal principles”.
The IGP supports the government in its efforts to help people by extending the furlough scheme and support for the self-employed until September as well as business rates relief and grants. This may provide the hospitality, leisure sector, the arts and culture sector, a lifeline to stay afloat during lockdown. But without a long-term plan for the recovery, we are not confident businesses will survive once furlough ends.
Furthermore, the Chancellor earmarked funding to regenerate areas and towns with a £1bn fund, and £150m for community groups to be encouraged towards entrepreneurship, through taking over pubs at risk from closure. This relates to the 4th recommendation, where all citizens and local communities play an active role, but much more is required to involve them in the wider policy-making process. The IGP agrees with the Chancellor in not raising regressive taxes such as national insurance, VAT, and income tax, which would hit the poorest regions the hardest.
In terms of environmental spending and the ambition to become net-zero by 2050, we welcome the creation of a New UK Infrastructure bank in Leeds. Investing in sectors such as renewable energy, carbon capture, storage, and transportation, and providing low-rate loans to mayors and councils to fund projects is a step forward. This links with the IGP’s call to localise funding and provide the tools for local councils who know their respective communities best, to invest towards a ‘greener economy’. Our work in the Euston/Camden area with citizen social scientists highlighted the lack of green and open spaces which tended to be overlooked in favour of property development, pricing out local people from these new properties, we hope this will no longer be the case.
At the same time, the Chancellor propped up the housing market with stimulus such as extending the stamp duty holiday until June this year which may be beneficial in the short-term, but will also “compound the UK's housing crisis, driving up house prices” according to the Joseph Rowntree Foundation (JRF). This will be to the detriment of many people since it does very little to solve the in-affordability and poor quality of housing. A lack of support for struggling renters also contrasts the idea of turning “generation rent” into “generation buy”.
This budget is a patchwork plan with no clear vision or strategy for the long-term future. We understand the uncertainty around the pandemic means planning ahead can be difficult however, to have no indication of what the future of the UK economy would look like beyond Office for Budget Responsibility (OBR) forecasts of growth returning to pre-Covid levels was a neglectful move and signals the government bypassing many deep societal issues.
The Chancellor missed the opportunity to take a radical approach, by focusing on jobs and employment through announcing plans to “shift people into well-paid jobs” and apprenticeship schemes. Instead, the IGP would like to see secure livelihoods through the provision of UBS as the main priority. The Chancellor failed to mention prosperity and quality of life which cannot be solved through income and wealth alone. Equally, the jobs provided need to be of high quality and yield high returns to avoid the job precariousness and in-work poverty that so many people face. They must also cater for diverse groups who have been hit hardest by the pandemic and face considerable barriers to employment, such as the BAME community, young and older people, and those with disabilities.
Social care was once again ignored, failing to deliver on the promise of the Prime Minister on tackling the issue “once and for all”. The sector experienced a substantial funding crisis prior to Covid, further exacerbated by the pandemic and with short-term grants set to expire in March, the Chancellor overlooked an important and necessary intervention. There were no policies on education or funding announced to alleviate the strain on the education sector which reopens next week.
Other policies such as the £20 weekly uplift in Universal Credit and £500 one-off payments for working tax credit recipients are necessary for the short-term, however, as we move beyond post-Covid and thinking long-term, we would like to see a transition to universal public service provision related to our 2nd recommendation. This allows us to mitigate the negative effects of existing welfare conditionality including the punitive effects on those who miss out due to ineligibility and make better use of public finances, while enhancing people’s capacity to do what they want in life and contribute to society.
In 2017, the IGP costed UBS at £42.2bn (excluding adult social care and childcare services), equivalent to 2.3% of GDP. Funding and operationalising a UBS system would require a serious reformulation of the tax and benefits system. The IGP has proposed that a UBS system could be funded by a progressive tax regime involving a reduction of the income tax Personal Allowance. However, the Chancellor has increased this allowance to £12,570 which contradicts our funding strategy and cannot be described as “progressive and fair”.
The IGP is currently working with partners in London (Camden and Tower Hamlets), Liverpool City Region and Leeds, to test some of these ideas through UBS-type experimentations. Preliminary findings from two initiatives in Camden and Leeds show the huge immediate beneficial impacts on individuals’ livelihoods including enhanced job-readiness, greater access to job opportunities, improved access to online government services, reduced financial stress and social isolation. UBS can help to tackle poverty and inequalities, but crucially also support and create the capacities and capabilities that allow people to participate fully in society, from home schooling and learning, to job searching, through access to essential e-government services, GP appointments, cultural entertainment and/or connecting with loved ones.
The cost of a transformative upgrade to our public services towards UBS would be under £50 billion, half of what the Chancellor announced in extra spending yesterday. The problems that the country had pre-Covid have been made worse during the pandemic and will continue to exist after the emergency spending has finished. Only a serious program of investment in our communities and the fabric of society will allow us to ‘build back better’ in the future. As the Chancellor said, “the Tories are now the party of public services”, we look forward to hearing his plans for rebuilding our existing public services and expanding the digital access and food services that have proved so essential during lockdowns in the last year.