Spring Statement Farce While Services Suffer
Less than three weeks away from the UK’s supposed date of departure from the European Union and the one thing we can all agree on is that nobody knows what is going on.
Regardless of the ongoing chaos, Philip Hammond is due to deliver his Spring Statement later today in the House of Commons. Not badged as a fiscal event, the Chancellor will respond to the Office for Budget Responsibility’s outlook for the economy and public finances over the coming years.
One small caveat, of course, is that the OBR base their projections on current government policy and the assumption of “a relatively smooth exit from the EU.”
Given the flagship policy of the Government, i.e. Theresa May’s Brexit deal, has already died a second death, the OBR’s outlook will need revisiting as soon as we know if/when/how the UK leaves the EU. Either way, Phil’s got to say something, so here we are.
We can expect to hear the usual noises about an economy that ‘continues to confound expectations’ and a labour market that is delivering ‘record levels of employment’ amid inflation dipping back towards two per cent.
Obviously this rhetoric glazes over a whole host of issues in the labour market. Our recent report, Labour Market Realities: Insecurity, Stress & Brexit, highlighted that a third of workers are struggling to keep up with the basic cost of living. Few workers were expecting a pay rise in 2019 (a view shared by official forecasts at the Bank of England) while overwork and stress were rife.
These findings aren’t particularly surprising given real wages are still lower than they were in 2008 and the UK economy has endured the slowest recovery in history. It is likely then that the Chancellor will want to focus on raising productivity as a means of increasing incomes. He would be more than welcome, of course, to lift the draconian restrictions placed on trade unions which would enable workers to bargain for a bigger slice of the pie.
Unfortunately, and as reported elsewhere, the Chancellor is much more likely to announce a consultation on improvements to infrastructure financing. Perhaps a radical idea but maybe actually financing infrastructure would be a good place to start.
In a similar vein, the Government’s own Good Work Plan commits to placing equal importance on the quantity and quality of jobs yet I imagine we will hear very little about growing levels of in-work poverty and the millions of people employed in precarious work.
At the other end of the income distribution, pay rises for Britain’s highest earners have meant strong income tax receipts and more revenue going to the exchequer. We’re now at the stage where increasing income inequality could be framed as a success story which enables the Government to ‘end austerity’.
However, as James Lazou from Unite the Union points out, the end to austerity is all but an illusion for unprotected areas of government spending. Further still, if the end of austerity should mean anything to anyone, it should be the cancellation of the ongoing benefits freeze which is pushing thousands of families below the poverty line.
All in all, given the backdrop, it is impossible for the Spring Statement to be anything other than a farce. At a time of genuine crisis across our public services, the labour market and the environment, we are sorely in need of less consultation and more action. When Brexit is finally settled, the OBR will change their outlook for the public finances. What, however, is in even greater need of change is our vision for the future of the UK economy and society.
Liam Kennedy is Research Officer at CLASS