The Chancellor mustn’t gamble with the recovery

We need a Workers’ Budget that protects jobs, creates new ones and sets Britain up for a fair and sustained recovery. The government should extend furlough until the end of the year, invest to create good new jobs in every part of the country and deliver a decent payrise for all our key workers.  

The economic challenge 

The job retention scheme has protected jobs, with 4.7 million people on furlough at the end of January this year. But it hasn’t been enough to prevent a sharp rise in job losses, particularly for young people. February’s labour market figures showed that payrolls were down by 730,000 since the pandemic started, with a staggering 60 per cent of job losses coming from those aged under 25. The Office for Budget Responsibility estimate that unemployment could rise to a shocking 2.6 million (up from 1.7 million now) by the middle of this year if the Job Retention Scheme is withdrawn.

Many commentators are hoping that a rise in consumer spending, fuelled by lockdown savings, will be enough to deliver an economic bounce-back. That is a risky bet. Savings have been unevenly spread – with half of the lowest earners seeing a fall in their income, and there is evidence that higher earners are less likely to spend. And it’s not just about consumer spending, economic activity has fallen across the board – with the UK seeing falls in not just consumption but also in investment and exports that are well beyond the OECD average (in the third quarter falls were twice as large for all categories). An underpowered recovery is the biggest threat to jobs, incomes, and the public finances.  

That’s a lesson we should have learned after the financial crisis. Even before the pandemic hit, investment had been stagnant for a decade, wages still hadn’t recovered from the financial crisis. Northern Ireland, Wales and six of the nine English regions were already in a technical recession at the end of 2019. As the pandemic revealed once more, the result of a decade of austerity and inaction was widespread insecure work, with just under a million people now on zero hours contracts, structural discrimination hitting Black workers, women, and disabled workers hard, and, a frayed social safety net leading to soaring in-work and child poverty, and stretched public services.  

Building the recovery we need 

The chancellor must use the Budget to address these challenges; to protect jobs and incomes now; to secure and strengthen the recovery, and to build back better. Here’s how. 

Protecting jobs and incomes now 

The most urgent task for this budget is to protect against a slide into mass unemployment. 

• The Chancellor should extend the  full job retention scheme and an improved self-employment income support scheme until the end of 2021, mirroring the support in place in other leading economies. To get people back doing their jobs government must  provide furloughed workers with training, better protect their incomes through a minimum wage floor, and ensure support for the sectors they work in to make sure there are jobs to go back to.  

• The need to fix sick pay is urgent. Government must raise sick pay to £330 a week, and extend eligibility to the 2 million people who do not qualify because they earn too little.  

• Universal Credit could provide a vital lifeline for many families during this time. It should be increased to a level people can live off – at least £260 a week – and there must be no rowing back on the £20 uplift introduced last year. The five-week wait to access the benefit must be ended. 

Strengthening the recovery 

The greatest risk to the recovery is from complacency: the government needs to get ahead of the curve and to create jobs with a major programme of investment – and a vision of what it wants that to achieve.  

• The Chancellor needs to learn from Joe Biden’s winning formula, setting out a major investment programme. That should start with investment to create jobs: the TUC has set out how an £85bn programme of investment could help deliver 1.2 million jobs in the next two years in the green tech of the future and how investment in the public sector could start to repair the damage of austerity, filling  600,000 current gaps and vacancies.  

• A ‘family stimulus’ package could help drive the recovery, and tackle child poverty. 

• All key workers should get a decent payrise. Ministers must abandon their public sector pay freeze and give a fair payrise to all public sector key workers. And they must not forget private sector key workers: they should commit to a fast-rising NMW and allocate funding to raise the pay of outsourced workers providing public services.” 

• And the Chancellor should invest in the skills we’ll need to deliver the better economy we want to see – reversing the short-sighted cuts to the union learning fund, and delivering a right to retrain for everyone.  

A better recovery 

It’s time for the Chancellor to address the longstanding weaknesses in the UK economy that leave too many workers in the UK in insecure and low paid work, and scarred by inequalities that have been heightened by the pandemic and aspects of the government’s response. That means he needs a real industrial strategy – setting out a vision of the UK with decent job creation at its heart and meeting our vital commitment to net zero. And he needs to go further to show that this will be a recovery that tackles, rather than reinforces existing inequalities. Alongside the budget the government should announce: 

• A reconfirmed commitment to the public sector equality duty, with clear evidence of the impact the budget will have on different groups, and the steps taken to ensure that the government is addressing the inequalities revealed and deepened by the pandemic.  

• That the government will finally get on with bringing in its employment bill to ban zero hours contracts, introduce a right to real flexible work for all, and allow trade unions access to workplaces – as the best way to deliver fair work for all.  

This budget could be a chance to give people real hope for the future. The Chancellor must not fall short.  

We need a Workers’ Budget that protects jobs, creates new ones and sets Britain up for a fair and sustained recovery. That’s how we get out of recession, get our lives back and build back better.