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A spending review to level down Britain

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For all ministers’ talk of levelling up, this spending review will level down Britain, hit key workers’ pay and  break the  government's  promises to the lowest paid.

After a decade of standstill pay, yet another pay freeze is a kick in the teeth for the key workers in the public sector who kept the country going in this crisis.

And workers expecting a national minimum wage increase – not least the two million who are key workers – have been let down by the government’s decision to row back on the full rise they were promised.

Here’s how the government did against our ten point plan - in summary: poorly.

  1. Green infrastructure 

The TUC has shown that investing £85bn in green transport and infrastructure could create more than 1.2 million jobs in two years. Yet today the Office for Budget Responsibility (OBR) said “Departmental capital spending is little changed since the March Budget”. 

Previous increases in March were welcome, but fell far short of what is needed to support the economy in the aftermath of the pandemic – or to tackle the climate emergency.  

There was promising news that the government will set up an infrastructure bank in the North of England, but we do not yet know the size of the operation.  

  1. Public services and jobs drive 

This government has repeatedly insisted austerity is over, but it looks set to continue for some departments. While public services will get more money next year to deal with Covid, in every year after that the Chancellor rowed back on extra spending announced in his March budget.  

And as the IFS has pointed out, the promises made on health, defense and schools may imply cuts elsewhere. 

The Chancellor once again missed the opportunity to start fixing our broken social care system, offering no new money and instead forcing struggling councils to choose between tax increases that will hit low-income households the hardest and growing black holes in social care budgets. 

And the government’s levelling down agenda seems set to go global, with a cut to the international aid budget marking a retreat from our commitments to the world.  

  1. A family stimulus  

There is still no additional financial support beyond free school meals for families with kids during the pandemic.  

This spending review has failed families and children. 

  1. A strong safety net  

The Chancellor highlighted the expected increase in unemployment, yet failed to address inadequate levels of social security protection for those who lose their jobs.  

If you become unemployed, the basic rate of universal credit is around a sixth of average weekly pay. There was also no mention of the long wait to receive the first payment of universal credit, which is causing massive hardship.  

And when will Government realise that those who need to self-isolate because of coronavirus suffer a huge pay penalty if they have to claim statutory sick pay (one-fifth of weekly earnings)? Two million workers even fail to receive that.  

This results in workers being forced to choose between financial hardship or going into work with symptoms.  

  1. A pay rise for key workers through the National Minimum Wage  

Millions of low paid workers are getting us through this crisis by keeping food on the shelves, delivering essentials, caring for us, and much more. The crisis has exposed that all too often, essential workers have been undervalued and underpaid. 

The TUC believes the minimum wage should be at least £10 an hour, so people earn enough to live on. 

The government had plans to increase the minimum wage to £9.21 from next April, but announced a much lower increase to just £8.91. As a result, 2 million key workers will not get the pay rise they were expecting. 

When businesses face challenging times, low paid workers tend to suffer before shareholder dividends or executive pay. The Chancellor has missed this opportunity to provide adequate wage protections for those who earn the least.  

  1. Public sector pay rise - not pay freeze  

On Monday we called for a pay rise for key workers across the public sector.  

From carers to refuse collectors to benefits advisors and more, the public sector has been on the front line of the Covid-19 crisis and they’ve earned a decent pay rise.  

When the economy is depressed by a collapse in demand putting more money in workers pockets makes economic sense too.

NEF research for the TUC shows that not only would a pay rise have been just, it would have been affordable.

But the Chancellor chose to level down public sector pay. A freeze for millions of workers is no way to reward them for their hard work. It makes a mockery of the warm words and applause we saw from the government over the last year.

But more than that, it will drain further demand from the economy at just the wrong time. The answer is to raise wages across the board to increase spending power in the economy - not pit public and private sector workers against one another.

  1. Protecting pensions  

The Chancellor chose not to raid pensions and left alone the triple lock and or tax relief. But he opted to accept UKSA proposals to scrap the RPI and replace it with CPIH, though at least waiting until 2030 rather than doing so in 2025.

As union General Secretaries argued in an open letter, a lower RPI will hit pay packets as well as pensions.

  1. Skills  

The government continues to short change adults in urgent need of retraining to improve their job prospects, especially in those sectors hardest hit by Covid-19.

Instead of fast-tracking a massive adult retraining programme as the TUC has recommended, the Chancellor announced nothing new of substance on this front.

The commitment to give all adults an entitlement to achieve their first level 3 qualification, announced by the Prime Minister two months ago, is much too little too late.

And as a recent TUC report highlighted, this new entitlement will be taken up by far fewer people as a result of the puzzling decision by the DfE to cut the grant for the Union Learning Fund (ULF), which helps get working people into job-relevant skills and training.

  1. Fixing gaps in job protection  

The government has said it will review the level of support provided through the Job Retention Scheme and Self Employment Income Support Scheme in January.

It’s time to fix the flaws that leave people falling below the minimum wage and too many self-employed people missing out.

  1.  A National Recovery Council  

It is disappointing following initial collaborative work between the government, business and unions around the job retention schemes, and the subsequent constructive offer from the CBI, that the chancellor had nothing to say about a national recovery council. 

“Whatever it takes” 

The ten steps we proposed were aimed at delivering a better economy, but they were also essential for our recovery.

Having acted to protect the economy over the course of the pandemic, the government needed to act to support spending in the economy - not least by announcing large scale investment and public sector job creation.

Today’s measures fell far short of what is needed. An increase in unemployment of one million, while terrifying, now looks optimistic.

The government appears increasingly to be prioritising the perceived need to balance the books. But the worst thing for the books will be mass unemployment and a caved-in economy.

Rishi Sunak said he would do “whatever it takes”.

On today’s performance, he has not delivered.

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