A budget for recovery…but recovery for whom?
Years of successive budgets have been high on rhetoric and low on the content required to fundamentally change our economy. This budget is no different. The budget has continued to shore up spend, but not for local economies, local public services or the climate. In previous times, increased state spending would have benefited public sector workers and enhanced the social protection floor to insure us against poverty and destitution. Not this time.
Within the continued pledge to do “whatever it takes” there are plenty of warm words, bolstered by policies that show concern, but the cold harshness of a fossil fuelled economy of growth, financialisation and wealth extraction remains.
It goes without saying that these are unprecedented times that would challenge any government. Covid-19 has prompted huge shifts in how we think about the economy. The historic level of government intervention that we’ve seen over the last 12 months, with the introduction of the furlough scheme, has almost certainly helped prevent mass layoffs and business failures.
Today’s announcement that the scheme will be extended until the end of September, in conjunction with new restart grants, recovery loans and business rate holidays, will therefore come as a welcome relief to business owners, particularly in struggling sectors such as retail and hospitality.
“we may be just be kicking the problem down the line”
In reality, though, we may be just be kicking the problem down the line in the hope of a return to “normal”. There is a big question mark as to whether many of the jobs that existed before Covid-19 will ever return. The furlough scheme cannot be extended ad infinitum, and we now face huge structural economic change and a significant jobs crisis. We therefore need a substantive plan for industrial restructure and green jobs, with funding earmarked to develop pipelines to reskill those facing unemployment when the furlough scheme ends.
Furthermore, noticeably absent from the Chancellor’s speech was a recognition of the serious issues many local areas and local authorities face, particularly in the aftermath of the pandemic. At least 12 councils in England are in emergency talks with the government to avoid bankruptcy and despite some emergency help from Westminster, many councils are facing significant funding cuts in the next financial year. Any ability to deliver anything other than the basics, in terms of local public services, will be incredibly limited. And starved of financial resource, many will have no option but to raise Council Tax again, heaping yet more burden on low and middle income families who will be hit the hardest by a sixth year of increases in England above the rate of inflation.
There was also little found in today’s budget to tackle the systemic issues that bedevil our local economies. Financialisation is a defining feature of our unequal regional local economic geographies. Financial markets and institutions have an inbuilt bias toward speedy returns on capital investment, focused on high growth sectors, as well as asset-based appreciation stemming from property development (often in the urban centres of our core cities). This skews investment away from the relatively employment rich real economy of manufactured goods and services, as well as less “investment-ready” locations.
“the announcement of eight new freeport areas risks exacerbating this very problem”
Furthermore, investors are now increasingly global, often with little or no affinity or attachment to local places. This means that the return on investments is not readily recirculated by local investors into our local economies. Indeed, the announcement of eight new freeport areas risks exacerbating this very problem: offering a few shiny hotspots whilst many people and communities remain neglected. Deep work must now be done to mitigate this risk and the risk of them transforming neglected towns into sites of wealth extraction.
To truly level-up, local people and communities need to have power over flows of investment, to shape the places they live. Today’s promise of £1bn of funding for 45 new town deals across the UK will fail to bring opportunity and prosperity for all if it is deployed in a manner prescribed by the treasury. The Chancellor’s desire to stimulate the development of high growth innovative companies largely glosses over the needs of the everyday economy – sectors such as health and care, education, utilities and food – in which most people are employed and which give our lives meaning.
“the scale of the climate emergency demands that we go much further”
On the climate emergency, this is at least a budget which shows awareness of the unfolding crisis and the plan for a new UK infrastructure bank to finance a “green revolution” is a step in the right direction. Yet, the scale of the emergency demands that we go much further. We need a comprehensive green industrial strategy for the UK – one that harnesses all resources to cease carbon-intensive sectors, and to ensure a just transition, with green jobs to revitalise rural and ex-industrial local economies.
Many Britons are now suffering not just under the yoke of a shrunken state, but from a growing state that ignores them. Rebalancing the economy is not an exercise of moving money around, it’s about looking at how power and ownership operate in our society. We need to look at where the money goes and who has power over it. With this budget, big finance, large infrastructure companies and the existing wealth winners all win again. Just and green local economies for all remain as distant as ever.