Simon Haskel on the flawed strategy underpinning the Chancellor’s recent Budget
Public finances in the UK are still pretty bad. Headline borrowing is down, but the Office for Budget Responsibility (OBR) tells us that if you take into account the upswing in the economic cycle the figures are actually worse than a year ago. Growth estimates are not going to do much for this and the OBR is concerned that the little recovery there is may not last as it is largely cyclical.
So the direction of travel remains the same. More austerity combined with more exhortation and modest help to increase productivity, investment, exports, and jobs. And with its continuing impact on our society – inequality, low pay and welfare cuts.
We know that more unequal societies have slower and more fragile economic growth. Growth is faster in more equal societies.
The TUC’s fair pay campaign demonstrates that many of the jobs being created are low pay and low productivity. Many exclude security, training and good prospects. Some employers insist on dehumanised terms and working conditions. Successful leadership means that people have to think that you believe in what they believe. “All in it together”, as David Cameron and others say.
This sort of insecurity and inhumanity encourages a hostile climate towards business – a hostility which degrades trust. Without trust in business there can be no strong economy. And because the current level is so low, it wouldn’t be difficult for a Labour government to manage this better.
I welcome the Budget’s encouragement for training, apprenticeship, and qualifications, but the economy is changing too. We are moving into the kind of economy that doesn’t just pay you for your qualifications and knowledge. It pays you for what you innovate with them. That kind of knowledge economy requires a different kind of investment. A less tangible kind of investment.
I raised this in the Lords in last year’s Budget debate and somebody seems to have listened. On page 73 of their outlook, the OBR says that we do rather well at this kind of investment – better than most of our competitors. We have also kept it up. So why not recognise this in the Budget’s tax and incentive systems? Surely this is part of the journey away from the low tech, low pay, low productivity economy. By not doing this the Coalition is giving a mixed message on growing the economy.
If Britain is not leading the world in science and technology and engineering, we are condemning our country to fall behind – that Chancellor said that, and I agree with him. I also welcome the announced funding for various projects: the Institute for Data Science, additional centres for training, cell therapy and Grafine. But meanwhile the core science budget has fallen in real terms when it is long term funding that will produce the sort of projects for which support is being given.
There was a time when we were promised an industrial strategy which would produce balanced and sustainable growth. But it looks as if we are getting a recovery based on low productivity, on a housing boom and on consumption, with households dipping into their savings. Instead of a recovery that works for all, it is working for the few with many people having to make do with low wages and dehumanised working conditions. This Budget is not going to produce either the economy or the society which I would like to see.
Lord Simon Haskel is a backbench Labour Peer
Published 27th March 2014