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Ten steps for a Spending Review to create decent jobs

Published date
The spending review, due to be announced this Wednesday, is a big chance for the Chancellor to think about how we get our economy back on track. With redundancies in the latest quarter at the highest on record, attention must be shifted decisively to delivering decent jobs.

Although we wanted a three-year review to meet the needs of public services, the one-year review should deliver a major increase in spending. 

This should be aimed at creating decent work across the UK and repairing gaps in jobs social security protection, which is even more important if the government takes us into a job-destroying no-deal or bad Brexit deal. 

This spending could not only create decent work, but also restore public services and set the economy on the right track for the future. And while headlines focus on the need to get public finances back in order and the insulting attack on public sector workers, the only way to do this is to continue to prioritise the needs of the economy. 

Here’s how: 

  1. Green infrastructure: 1¼ million jobs (85bn over two years) 

Government’s announcements on green jobs this week should be seen as a down payment on future ambition.  

According to the IPPR, so far the government is allocating only £4bn annually to tackle the climate emergency.  

TUC research shows that if the chancellor fast-tracks £85bn of spending on green infrastructure, he could create 1.24 million jobs by 2022.  

This is broadly in line with recent IMF work, showing investment spending 1.0 per cent of GDP will increase employment by 1.2 per cent. In the UK case, this suggests £22bn spending will leads to 390,000 jobs (the new economics foundation have the bill closer to £30bn over two years).  

  1. Public services: 600,000 jobs (£20bn) 

While public services are required to continue to operate without a multi-year settlement, immediate spending can be focused on filling vacancies and meeting obvious new needs – not least a National Care Service to match the NHS.  

Posts we urgently need now include:  

  • 135,000 in the national health service – filling existing vacancies and recruiting more doctors  

  • 220,000 in adult social care – filling vacancies and adding 100,000 workers to start to meet additional demand;  

  • 110,000 in local government – replacing half of the workforce that have been lost since 2010 and helping deliver new pandemic related services;  

  • 80,000 in education -including 40,000 teachers to meet shortages, and 40,000 support staff to help deliver education in the new environment; and  

  • 50,000 in broader public administration – including new Jobcentre Staff to help people into work and new customs officers to deal with the challenges of Brexit.  

The quickest way to cut the jobless rate would be for the government to unlock these jobs.  

  1. A family stimulus  

The TUC, along with the IPPR, made the case for a “family stimulus” through the social security system.  

This will put much needed cash directly into the hands of families and provide a stimulus for the economy, whilst improving outcomes for children.  

Doubling child benefit will inject £14 billion into the economy over the next 18 months and boost GDP by £19 billion.  

Increasing the child element of universal credit (UC) and child tax credit (CTC) by £20 per week per child and removing the two-child limit would inject £11 billion into the economy, and boost GDP by £15 billion.  

Both policies would substantially reduce poverty - lifting between 500,000 children and 800,000 people above the projected poverty line.    

  1. A strong safety net  

Those who need to self-isolate because of coronavirus suffer a huge pay penalty if they have to claim statutory sick pay.  

At £95.85 a week this is worth less than a fifth of weekly earnings, and around two million people are not entitled even to this, because their earnings are too low to qualify.  

Statutory sick pay must be sufficient to cover basic living costs and must rise to the equivalent of a week’s pay at the Real Living Wage – around £320 a week – with the lower earnings limit removed. 

As the unemployment crisis intensifies, the basic rate of universal credit will be exposed as massively inadequate.  

In 1984 unemployment benefits were worth a quarter of average earnings, in 1993 one fifth and today one sixth, just £94 a week. The support compares poorly with other European countries, where benefits are paid as a proportion of previous earnings, ranging from 60% in Germany to 90% in Denmark.  

The TUC says that in the long term the government should move towards an earnings-related system. Immediately, the basic level of Universal Credit should be raised for the duration of the outbreak to 80% of the real living wage – or £260 a week.  

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

The minimum wage should be set at least £10 an hour for all workers. Our analysis shows that 3.6 million key workers would benefit from this increase.  

Ministers’ must resist the calls to freeze the national minimum wage and deliver a decent increase to the lowest paid workers. The government’s own evidence shows that significant minimum wage increases have been achieved without damaging employment.  

If the government wants to protect jobs it needs to invest - not hold down the wages of those who can least afford it. 

  1. Public sector pay rise - not pay freeze  

Austerity has meant some public sector workers have seen the real value of their pay fall by up to £3000 a year.  

While some have now finally seen pay rises in line with the recommendations of the Pay Review Bodies, too many were left out, including care workers, NHS staff and lower paid civil servants. A pay rise is needed not just for fairness, but to meet crises of recruitment and retention.  

A pay rise of 5% above CPIH inflation (4% above RPI) for all public sector workers will cost around £7bn. Around half of this would be recouped, as the spending strengthens the economy.  

Talk of a pay freeze for those putting their lives at risk on the front line when consultants are raking in £2,000 a day is not only insulting but wrongheaded: any spending cuts at this time will be a false economy.  

Equally the calls to cull the aid budget are all too familiar, when we should be stepping up not retreating from our commitments to the world.  

  1. Protecting pensions  

Now is not the time for a raid on pensions.  

The chancellor must ignore calls to pass the cost of tackling coronavirus onto future generations of pensioners by scrapping the triple lock on the state pension.  

This mechanism is gradually increasing what remains one of the meanest old age pensions in Europe. Getting rid of it would hit current pensioners and push an extra 700,000 retirees into poverty by 2050

The chancellor should also resist the urge to cut tax relief on contributions to workplace pensions. The system is ripe for reform, but we know millions of workers are not on track for a decent standard of living in old age.  

Any changes should focus on helping these people shore up their retirement savings, not taking money out of the pension system. 

  1. Skills  

To help working people get good new jobs we need to support them to upgrade their skills. Any strategy for recovery must have at its heart real investment in skills and retraining.  

Union learning is a proven success in getting reluctant learners into job-relevant learning and skills, and routinely helps working people get their first qualifications. 

Last year 200,000 learners took part in union-brokered courses. Union learning is open to all workers, union members and not and is supported by employers, including Tata Steel, Heathrow and Tesco, and by industry organisations such as CIPD and Make UK. 

We are therefore disappointed and puzzled by the proposal to scrap the Union Learning Fund from next March, and urge the Chancellor to rethink. 

  1. Fixing gaps in job protection  

The eleventh-hour decision to extend the jobs retention scheme until spring at least has brought some temporary relief to many working families and firms. But there are still gaps in the government’s support package.  

Millions of low-paid workers on furlough will have to survive on less than the national minimum wage. And too many self-employed people are still missing out. 

Support should also be targeted at hard-hit sectors such as the arts, aviation, retail and hospitality. These are all viable industries, strategically important for the UK’s future, and big employers.  

The government should fix these gaps — and use the breathing space created by extending furlough to get ahead on the challenges of 2021.  

  1. A National Recovery Council  

A plan for recovery needs the input of those who must deliver it.  

We urge the government to take up our suggestion, this month repeated by the CBI, of a national recovery council, made up of businesses and unions alongside the government, to steer the recovery effort. 

As always, the trade union movement stands willing to work with any government to protect jobs, build working people’s skills and create good new jobs on decent wages.  

We can’t afford not to do it 

There are many ways that the job retention schemes could be improved. But it’s clear that these job protection measures have supported the economy throughout the pandemic.  

That support needs to remain in place as we hopefully enter the recovery.  

On top of this, the economy needs more spending to keep it going. People losing or scared of losing work will hold back on spending. Firms will not invest when the public is not spending, and the same is true for the rest of the world.  

Only the government is able to support spending under such conditions.  

Understandably, some are concerned about public borrowing, but allowing the economy to implode will be far more costly to the public finances than measures to support the economy.  

As businesses collapse, and people fall out of work, they stop paying the taxes that government relies on. And government costs go up too – because of higher benefit spending and the wider social damage mass unemployment causes.  

Acting now will prevent greater damage down the line and is the only economically sensible thing to do – as well as the right thing to do to support families and communities. The only way to set the public finances on the right course is to set the economy on the right course.  

GDP figures show the UK economy in the third quarter still around 10 per cent below the position before the pandemic, and likely now to weaken further at the end of the year.  

Spending to offset this 10 per cent – or £220bn – fall is a good starting point.  

Other institutions have offered figures in this ballpark, for example, the Resolution Foundation offered two approaches (‘hippocratic’ and ‘historical’ - table 3 here) leading to the same figure. 

Rishi Sunak said at the start of the crisis he was willing to do “whatever it takes”. This means investing to create decent work.  

We hope for all our sakes that he delivers.  

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