Spend to Save Britain - public policy researchers respond to Autumn Budget

Members of the Common Sense Policy Group, led by researchers at Northumbria University, have released a new report Spend to Save Britain: A Common Sense Approach to the 2024 UK Budget.

The report led by Dr Elliott Johnson, Vice Chancellor’s Fellow in Public Policy, and Howard Reed, Senior Research Fellow in Public Policy from the Department of Social Work, Education and Community Wellbeing, evaluates the Chancellor of the Exchequer’s first Labour Budget for 14 years against the urgent needs of citizens and sectors alike. It also compares the measures announced with the group’s Act Now plan for rebuilding Britain, which was published as a book in advance of the General Election. 

The research group, which also includes Kate Pickett, Professor of Epidemiology at the University of York, and Richard Wilkinson, Visiting Professor of Social Epidemiology at Northumbria, use innovative economic modelling methods, including microsimulation, and public opinion analysis to argue that, while the Autumn Budget is a step in the right direction, its substance does not go far enough. The report suggests that the Government’s new fiscal rules mean the Budget has stopped short of the kind of transformative public investment package that rebuilt Britain after 1945, based on the work of social economist Sir William Berveridge.

The authors of the report suggest the change to the definition of debt has freed up some space for borrowing for investment in infrastructure, though not enough to make up for the impact of cuts seen over the last 15 years. On the other hand, the announced ‘stability rule’ and a two per cent productivity, efficiency and savings target mean that the austerity agenda which has prevailed during this time will continue for current spending in most government departments. Elsewhere the group cite the increase in ‘jobs tax’ National Insurance contributions and the failure to increase affordable corporation taxes on profits, or to equalise tax rates on income from passive wealth, as particularly problematic.

The group argue that this undermines the ability of Government to rebuild the nation and instead they advocate for public investment which, through productivity multipliers, can generate £2.74 for the economy for every £1 of public funding invested in infrastructure.

The report’s lead author, Dr Elliott Johnson, said: “To support that initial investment, our analysis shows that straightforward, fair and effective taxation on passive wealth, carbon production, luxury consumption and corporate profit is feasible, affordable and, critically, popular. Shifting the burden from work to wealth is popular with the public, with an average approval rating of 73/100 nationally, and 60/100 among 2019 Red Wall Conservative voters.

“The Government's stated vision is a decade of national renewal. This report shows how that can be achieved, with an ambitious common sense alternative budget underpinned by a comprehensive and sustainable set of economic rules providing funding for a whole-government programme based on Act Now.”

The group’s Senior Economist, Howard Reed, who, with Dr Johnson briefed MPs in Parliament in advance of the Budget on Wednesday 23 October, added: "Rachel Reeves took some first steps towards reversing austerity in the NHS with real-terms increases in current and capital spending. The increase in the capital budget for schools was also welcome, although neither increase is enough to fully offset the impact of austerity since 2010. However, the announcement of two per cent per year productivity and efficiency savings targets across the board in the public sector sounds a codeword for continued real-terms cuts across a range of other departments which can ill afford further austerity after 15 years of constraints.

“The main tax increase announced, the increase in the employer National Insurance contributions rate, was accompanied by a reduction in the payment threshold from £9,100 to £5,000 per year - which pulls many employers of low-paid and part-time workers into National Insurance Contributions liability and could have an adverse effect on employment for the low-paid. The increase in Capital Gains Tax didn't go far enough and it's also unclear why the Capital Gains Tax rate for basic rate income taxpayers rose by more than for higher and additional rate taxpayers. Furthermore, the decision to freeze fuel duty is a capitulation to the right-wing press at a time when the government can ill-afford extra giveaways like this."

The group is currently planning Parliamentary engagement around the  follow-up book to Act Now, Basic Income: The Policy That Changes Everything, which sets out how tax reform can be coupled with social security reform to tackle directly the financial insecurity that affects increasing numbers of Britons.

Chair of the Common Sense Policy Group, Professor Matthew Johnson, explained: “The Chancellor has made much of the need to be responsible: further austerity, a failure to shift the burden of tax from work to wealth and a refusal to meet prior commitments to investment in the transition to net zero are anything but. We show that being responsible is investing and ensuring that the nation owns its own essentials. We must take back our house and run it as a business – this means recognising that the things we own are just as much part of the balance sheet as the debts it incurs in buying them.”

Visit the Common Sense Policy Group website www.commonsensepolicygroup.com to read the full report, Spend to Save Britain: A Common Sense Approach to the 2024 Budget.