After a decade of austerity, what have we got to show for it?

Rachel Reeves

Tomorrow’s Budget will take place in extraordinary circumstances – with the world’s first pandemic in over a century looming and all the signs pointing towards a major global economic downturn. Coronavirus is going to need urgent action, fast. That means pumping funds into the NHS to help it cope – but that alone will not be enough. We need a serious fiscal stimulus package. The Chancellor Rishi Sunak needs to consider all the people who will suffer if the economy takes a hit.

Our economy has become increasingly reliant over the last decade on insecure and self-employed workers, including in vital sectors like social care which will be particularly impacted by the virus. They do not have the guarantee of sick pay, and are liable to struggle if they have to take time off work if they are ill or have to self-isolate. The Chancellor needs to come up with a plan for how to support them. We cannot leave people to face the choice of self-isolating or putting food on the table.

Small businesses will also feel the strain if people are spending less in shops, restaurants and pubs. Ministers should consider offering support to small businesses struggling to pay their VAT bills, which are paid quarterly and can therefore place particular pressure on businesses suffering from a short-term loss of income. In the aftermath of the 2008 financial crisis, the last Labour government made arrangements for struggling businesses to defer tax payments. A similar scheme would be very valuable now.

But the Chancellor should not use coronavirus to distract from the long-term structural weaknesses in our economy. He must not let the opportunity represented by this Budget pass without providing the urgent investment our communities need. I remember one of the Chancellor’s predecessors used to accuse Labour of failing to fix the roof while the sun was shining. But here we are, after a decade of austerity, and what have we got to show for it but run-down infrastructure, weak growth and stagnant wages?

The government has been talking about ‘levelling up’ the UK’s regions outside of London and the South East. But all the signs suggest they do not appreciate the scale of the task at hand or how to address the problems. It is worth putting in perspective the scale of the challenge. For over a decade now, wages have stagnated and Britain has grown ever more unequal. For large parts of the country, there has been no recovery at all since the 2008 crisis.

As the office for national statistics revealed, the worst-off 20% of Britons are no better off than they were in 2004. The weakest recovery in terms of growth and employment has been in the North East and in Yorkshire and the Humber, where I am an MP. Meanwhile, three of the four regions most affected by austerity are in the North.

So, let’s be clear: the Tories face an uphill challenge to undo the decade of damage caused by austerity. Already, a little over three months on, the government has broken a series of pledges it made about investment in the North. The poor state of infrastructure is perhaps the biggest single factor driving the economic underdevelopment of parts of the country.

And despite the pre-existing gap, IPPR research showed that planned infrastructure spending would see London receive almost three times more per person than the North and seven times more per person than in Yorkshire and the Humber or the North East. And yet, the Prime Minister has already broken his pledge to get rid of Pacer trains – a daily reminder of our second-rate train services in the North – by the end of February.

Even more vividly, the government has still not got to grips with flooding. Flood defences are the kind of investment that are an absolute no-brainer for a government: shovel-ready projects which will pay for themselves many times over by avoiding the costs that come with the damage done by flooding across the UK. For over a decade, experts have been warning of the need to substantially increase spending on flood defences in anticipation of increasingly severe climate events.

While there was an increase in the last year of the last Labour government, the Tories have spent most of the past decade cutting back on flood defences. We have all seen the consequences. Year after year, our constituents pay the cost for the Conservatives’ failure to act on this. My own constituency, Leeds West, experienced severe flooding in 2015. More than four years later, we are still waiting for £23m of funding need to complete the work. Similarly, our energy infrastructure and housing stock desperately need investment.

Yet the government has already pushed back the unveiling of its national infrastructure strategy, which had been expected to involve £100bn of investment to boost the economy and tackle the climate crisis. This kind of serious investment is vital, but the government have not given us any confidence it will happen. So, we wait to find out if the Chancellor can deliver the bold break with economic orthodoxy that the country needs. With record low interest rates, we should be investing now. It makes economic sense and can help tackle low productivity crisis, regional imbalances and get our whole country the changes we need.

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