An uneasy budget for a country ill at ease with itself



“Local government has been ravaged by seven years of cuts, and this budget showed no sign of this letting up.”

These are perilous times for UK economy. Our public services face rising demand alongside declining budgets. Our labour market is haunted by sluggish productivity and the threat of automation. A whole generation has been priced out of the housing market. And that’s even before we get to the all-consuming Behemoth that is Brexit, which will continue to pose both political and economic challenges for years (if not decades) to come.

It is within this context that Phillip Hammond delivered his budget yesterday. Some of his major announcements included investments to boost high-tech industry, funding for city-region transport and various measures to boost housebuilding.

Investing in new technology, transport and housing is surely worthwhile for the health of the UK economy. But what does this budget mean for local economics? Local government has been ravaged by seven years of cuts, and this budget showed no sign of this letting up.

A shocking admission from this budget – one that Hammond frequently stated was “for the future generation” –  was urgent investment to restore the state’s safety net. The government does not seem to fully appreciate that properly funded and effective public services are inputs to economic success. Rhetoric used to frame public services ‘expenditure’ to be ‘cut’ has the effect of devaluing them. Rather the debate should be centred around ‘investment’, because ultimately if public services and public goods are adequately funded, this will help to boost productivity and growth as a result. It is perhaps not a surprise that these two measures were downgraded by official forecasters yesterday.

Yet to secure a real terms growth in resources to local government is not enough. There also needs to be a fundamental rethink of the balance between progressive taxation and spending, to ensure that these public services are designed to work towards a more economically and socially just society (as is already happening in cities such as Barcelona). The economic and social impacts of any funding changes must be considered to protect the poorest communities, and ensure that the gap in outcomes between the most deprived and the most affluent places can be reduced. Yet even if national politics continues to ignore the importance of local economics, local authorities have shown how pursuing local wealth building can reinvigorate their local economies.

The last election featured a marked rise in turnout among young people, and as a result politicians of all sides have tried to appease this group. Hammond is no exception, with one of the few big ‘giveaways’ in the budget being a scrapping of Stamp Duty for first time buyers (aka a giveaway to young people wealthy enough to think about buying a house).  Yet with this focus the Chancellor risks neglecting a generation who face many challenges in the labour market. CLES’ work has highlighted the barriers that over 50s face in accessing employment (and policy proposals to help address these), with this age group more likely to be out of work than most younger age groups, and once unemployed struggle more than younger jobseekers to get back into employment.

This budget was characterised by bean-counting over innovation – a Conservative outlining a mostly conservative set of plans for the economy. The radical change that is forthcoming – whether via the impact of Brexit or of future technology – should warrant radical action. Our politics is in a sad state of affairs when ‘radical action’ is something as common-sense as central government giving local government more of a role in their own economic destiny. However, there are hopeful signs that the local can be configured (without much, or perhaps any, of the central state’s assistance) to help solve some of the challenges facing the UK economy – issues of productivity, equality and growth.

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