Simon Haskel on the self-inflicted damage of the government’s version of austerity
George Osborne’s recent Budget promises more austerity, with many of the proposed actions designed to put right the low investment in infrastructure, skills and training; as well as disappointing exports, tax receipts and low productivity. All themselves a result of austerity.
As Alan Milburn, Chair of the Social Mobility and Child Poverty Commission, pointed out earlier this month, much of this falls unfairly on Generation Y. Economic security cannot just be a matter of accountancy and government book-keeping. A robust and properly regulated financial system is required to protect us from outside pressures, and there is little said on this in the Budget.
There are however, plenty of political statements. Take infrastructure for example, where the government speaks of the roads, railways and flood defences that are on the way. But what the Chancellor does not tell us is that much of this expenditure is on feasibility studies and design, or organisation and preparation. All essential – but for the next but one generation and not the current one. What is for the next generation are the many small and local projects essential to cut bottlenecks and help local businesses, but which starved local authorities are struggling to support. So instead, we hear about promised prestige projects a long way off in the future.
Government investment in science and engineering is of course, one way to raise our productivity and vital to our standard of living. But a few days before the Budget, the National Audit Office warned that the financial planning for these projects was very poor. Plans should cover the entire project from start to finish rather than from Budget to Budget.
Ministers don’t seem to understand the way the world of work is changing and the impact on productivity. Labour has long argued the point, but Sir Charles Bean’s review into economic statistics also concludes that intangible investments are not properly reflected in the UK’s figures. For example, go into a travel agent, book a ticket and that becomes part of GDP because of the investment in the agency; but be more efficient and book over the Internet and it isn’t.
In failing to understand what is happening, we really are in danger of solving yesterday’s problems. Many firms have announced they will pay for the increased minimum wage with less hours, less overtime and less benefits. But this increase should be financed by a rise in productivity. If the means of achieving this are not recognised, then all we will get is a race to the bottom. And perhaps even more important that we get this right as the Bank of England’s chief economist, Andy Haldane is warning that up to 15 million jobs are at risk because of the greater data storage and computer power providing the tools to raise productivity.
We need Budgets which will build a robust and secure economy, and invest in long term business, industry and the environment, and skills and services. Not those designed to deal with the self-inflicted damage of the government’s version of austerity.
Lord Simon Haskel is a backbench Labour Peer
Published 23rd March 2016