Turning the page

This week’s spending review may well define this parliament and this government. As the dust settles, and the verdicts roll in, a clear picture emerges.

The spending review needed to pass three tests. First, it needed to raise living standards. Our research, published last week, showed that real household disposable income declined in the last parliament – for the first time on record, people were poorer at the end than at the start. We argued that this spending review needed to pass the ‘living standards test’and provide departments with the resources to make people on low- and middle-incomes better off.

There were several measures which addressed the cost of living, from retaining the bus fare cap to free school meals. Taken together with last year’s budget, the government’s analysis shows that low- and middle-income households will indeed have significantly more money. The spending review, however, was perhaps oriented more towards improving living standards over the longer term than during this parliament. Such longer-term measures included the significant capital investment in transport, R&D and social and affordable housing. This is welcome, and in line with many of our recommendations. If done well, this will improve productivity, raise incomes and help control housing costs in time.

But the government will now need to do more to improve living standards this parliament. That means improving income security with the employment rights bill, ensuring social security better supports those in need, and doing more to raise the uptake and generosity of social tariffs. We argue that there needs to be a Treasury-led taskforce to ensure this policy package is cohesive and greater than the sum of its parts. We are also beginning work to ensure the employment rights bill is implemented and enforced, and setting out what future legislation will be necessary. We are also finding ways to ensure that vulnerable self-employed people have the protections they need. And, as the government’s position on the two-child limit remains unclear, our proposals provide a straightforward roadmap: first, abolish the limit for the overwhelming majority of children, and then end it altogether, while keeping the public on side.

Second, the spending review needed to repair public services. When the Conservatives took office in 2010, they undertook a spending review which saw many departments cut to the bone, with social security and local government budgets hit especially hard. We all know what happened next.

Wednesday’s spending review was, in some ways, the mirror image of its 2010 ancestor. Taken together with last year’s budget, the bar charts and the line graphs went in the other direction, and show some departments surpassing their 2010 levels. Yet, while this is certainly no return to austerity, many department budgets remain very tight indeed. And the state will be a very different shape, with health and social care taking up a vast and increasing proportion of public spending. That means our proposals for the National Care Service and Fair Pay Agreement in social care will be crucial. Our ongoing work focusing on occupational health, and on digital health technologies, will support government to undertake a bold reforming health agenda.

Third, the spending review needed to boost capital expenditure, both to grow economies outside London and to support social and affordable housing in overheating markets. Our analysis shows that we have lagged behind countries like Germany and France for decades. A great deal of our work has made the case for increased capital investment in areas ranging from social and affordable housing and productivity enhancing infrastructure to flood defences. And we have argued consistently that that towns and cities outside of London and the south east are more than ready to help grow the national economy, while poverty in the capital must be addressed too.

It passed this test with flying colours. Higher capital was a major feature. The transport projects announced before the spending review were welcome news for the north and midlands especially. Under the Conservatives, these regions were offered little beyond vacuous slogans like ‘Northern Powerhouse’ and ‘levelling up’. This government has put real capital funding behind regional economic development. And they will be supported by the planning and infrastructure bill and devolution white paper, which are closely aligned to our proposals. We are gearing up to start the long hard road of turning around these communities, which will make for a healthier, more resilient and more productive UK economy.

Now, the government has to deliver these projects on time and on budget, and make sure local leaders are in charge wherever possible. Major infrastructure takes more than one parliament to build, but voters will need to see progress by the next election.

After almost a year, people are understandably asking: “where is the change we were promised at the last election?” Spending reviews don’t deliver change; they enable it. And the potential for this government to deliver that change is now as clear as day. It was clear in last year’s budget, and in the legislation that has been passing through parliament in recent months.

But in reality, most of the government’s policies have yet to make contact with people’s daily lives. When they do, the government must make sure people know that they are better off because of actions a Labour government has taken – or, as the chancellor said, because of “Labour choices”.

Image credit: HM Treasury via Flickr