Austerity has pummelled living standards and public services. Now is the time to end it.
The decade of austerity so far has been the worst economic policy error in a generation. As a consequence, living standards have suffered substantially, and public services diminished. Reversing austerity will mitigate these harms and have other beneficial effects, including boosting demand, which will drive up productivity. Proposals include:
- Frontload public investment for a‘green transformation’. The government’s official advisor on climate policy (Committee on Climate Change) estimates that transitioning industry to net zero carbon will require public and private investment worth 1 – 2% of GDP by 2050 (£20 billion to £40 billion in 2019/20 prices). A significant portion of the required public investment should now be front-loaded over the next five years.
- Increase public spending on services. NEF analysis has shown that between 0.5% to 1.5% of GDP – around £15 billion to £32 billion in 2019/20 prices – would be needed to meaningfully improve services and reverse austerity across education, health and care by the mid-2020s. Government should use the next multi-year Spending Review to increase investment in public services to meet social need and address inequalities.
- Increase the generosity of social security. Government should create a new‘weekly national allowance’ – worth £2,500 per year for almost all adults, plus an increase in child benefit – by abolishing the personal allowance of income tax. The proposal redistributes £8 billion a year from the richest 35% of families to the remaining 65%, with most of the gains concentrated on the poorest 10% who are most likely to spend rather save any increase to their incomes.
Tags Active state
- Austerity by stealth? New Economics Foundation, 2018
- Time for demand. New Economics Foundation, 2019
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