Short-term business and job support measures. In a widely welcomed move, the Chancellor extended the Government۪'s business and job support schemes until the autumn.
~~Excluded. An estimated 600,000 more people - the newly self-employed in 2019-20 - are now eligible for the Government support through SEISS. Millions remain excluded from support schemes, however, as highlighted by Martin Lewis on Andrew Marr.
Social security measures. Maintaining the £20/week uplift in Universal Credit was widely welcomed, but many campaigners have argued for a more permanent reform of social security.
~~Millions facing income crisis. NEF research has found that even with the uplift, a third of people are expected to fall into hardship by May, and almost 1 in 5 will be living with an "exceptionally high risk of material deprivation".
~~Legacy benefits. The Resolution Foundation also pointed out that many people on "legacy benefits" (pre-UC benefits such as Income Support) have not received an equivalent uplift, which the Disability News Service argues leaves 1.9 million disabled people worse off.
~~Longer-term reform. The RSA also argued the Government should replace Job Centres with Job Security Centres (bringing together unions, employers and others) as part of a new "Blueprint for Good Work" and look towards introducing a Universal Basic Income to address economic insecurity, elements of which could be put in place now.
~~Is that possible? The Economist coverage of the Budget highlights demographic pressures and argues "it is hard to find waste in the public sector", limiting scope for cuts. The IFS argue the Government's public spending plans "simply look implausibly low", in light of ongoing pressures on education, the backlog of court cases, and the need to reform social care, of which there was no mention in the Budget.
~~Health. The Health Foundation argues that major pressures on the health service were not factored into public spending plans: the cost of managing Covid-19 as it becomes endemic, the need for more capacity in the health system, and the backlog of patients that has built up over the pandemic.
~~Social care and inequalities. Beyond these direct pressures, the Health Foundation argues the pandemic has exposed the fragility of the NHS to shocks and the need to tackle the "broken" social care system and "deep-seated" socioeconomic inequalities, both of which increase the burden on the health service and neither of which were addressed by the Budget. (See the "Inequalities" section below for detail on the proposed 1% pay rise for nurses.)
Taxation. The Chancellor reaffirmed the Conservative manifesto commitment to not raising income tax, VAT or National Insurance, limiting the Party's room for manoeuvre when it comes to raising taxes in future.
~~Freezing income tax thresholds. The decision to freeze income tax thresholds - bringing more people into paying income tax and into higher tax bands - is one way to raise revenue from income tax while sticking to this commitment. While this measure is progressive, it is also the least progressive way of raising income tax.
~~Corporation tax to rise to 25% in 2023. The Chancellor has accepted arguments that corporation tax cuts have not stimulated investment (e.g. the final report of the IPPR Commission for Economic Justice), and the planned rise would bring headline rates of corporation tax more in line with the G7. There remains a question mark as whether the proposed rise will actually occur in full.
~~Council tax. Meanwhile, local authorities under financial pressure are already being forced to plan increases in council tax - which is highly regressive (see Sun coverage) - due to cuts in funding from central government, which the Financial Times has branded "austerity by stealth".
Super-deductions. In the near term, an est. £25bn will be spent on allowing businesses to write 130% of the cost of their physical investments against taxable profits. This could stimulate investment in the near-term, though there is a risk of "deadweight loss" - lowering taxes for businesses who would have invested anyway. Another risk is that super-deductions distort investment patterns by subsidising investment in plant and machinery compared to intangible assets.
~~Amazon wins. The untargeted nature of the tax cuts means that digital business who already pay low levels of tax in the UK - e.g. Amazon - will be able to further reduce their tax bills for investment that would go ahead anyway.
Levelling-up. Two of the Chancellor's "levelling-up" measures - freeports and the Levelling Up Fund - have come under fire.
~~Pork-barrel politics.Financial Times analysis has found that Conservative seats were consistently placed in a higher priority category for the Levelling Up Fund than their deprivation level would indicate, and the reverse is true for Labour seats. The Government is yet to publish its methodology, as promised. The Times' George Grylls has a thread on communities secretary Robert Jenrick's constituency receiving the "maximum amount of money it could have possibly received".
~~Freeports. The Chancellor announced the Government's freeport areas in the Budget. The criticism of freeports is that these encourage a politically costly race to the bottom, while the "advantages to business are almost non-existent", as argued by the UK Trade Policy Observatory. Tax Justice UK's submission to the Government's freeports consultation highlights significant money-laundering risks in addition.
~~Stimulus and the deficit. The IMF and OECD have argued that the Government should prioritise recovery over fiscal consolidation - but these two goals aren't necessarily in tension. IPPR has argued that stimulus may also consolidate the public finances, as it would increase tax receipts and employment. The BBC's Andy Verity has highlighted that efforts to "balance the books" over the past decades have coincided with an increase in public debt, speaking to the need for governments to prioritise recovery.
~~Political pressure.SPERI Professor Michael Jacobs has argued that COP26 and a shift in the Conservatives' electoral coalition has pushed the Government to change its approach to environmental policy, and that the Chancellor will likely have more "green goodies" to announce in the autumn as the climate summit draws near.
~~Fuel duty. For the 11th year in a row, fuel duty has been frozen. Carbon Brief argued last year that these freezes have increased CO2 commissions by up to 5%.
Finance and climate change
Green monetary policy. The Bank of England was given a new, green mandate in the March Budget. The Bank will be adapting its corporate bond purchasing programme as a result, and is set to carry out its first climate 'stress test' this year. The move was welcomed by organisations including the New Economics Foundation and Positive Money, who campaigned for a change in the mandate.
Greening the UK financial system. Daniela Gabor, Yannis Dafermos, Maria Nikolaidi and Frank van Lerven published a paper outlining how to "structurally re-align our financial sector with the challenges and risks posed by climate change" by developing a green and dirty public taxonomy of economic activities, making climate-related disclosures based on this taxonomy mandatory, and setting up a Green Finance Action Taskforce composed of state actors to oversee the greening of the financial system.
Covid-19 and 21st century public ownership. Common Wealth published a report on a year long project with the Democracy Collaborative exploring how public ownership could address economic, social and environmental challenges facing the US and UK, particularly broadband infrastructure and the digital divide; platform monopolies and inequality; intellectual property restrictions and access to Covid-19 vaccines.
Poll finds majority support for public ownership in pandemic response. A poll for We Own It and Keep Our NHS Public compared public attitudes to public and private responses to the pandemic, finding 75% of respondents think the NHS has been "more effective at handling the response" compared to 9% who chose private firms (Mirror coverage here)
~~Test-and-trace. The poll also showed "the public overwhelmingly believe the government's privately run Covid test-and-trace system has been a failure", as 29% believed it was successful compared to 60% who thought the opposite.
Home ownership. IIPP's Laurie Macfarlane argued that the March budget will "fuel a two-tier recovery" paying particular attention to the announcement of a new 'mortgage guarantee scheme', where the government's own forecasts predict the main effect to be pushing up house prices further - "a scenario that will benefit existing owners and kick the ladder further out of reach for everyone else".
10 proposals to raise $9.4 tn a year for a just transition. Tax Justice Network۪'s Taxcast explored how a just transition could be funded through wealth taxation with Ben Tippet of the Transnational Institute. (Long read here)
"Biden's stimulus is the dawn of a new economic era." Adam Tooze wrote for Foreign Policy, situating the American Rescue Plan (ARP) in its historical context and opposing it to the 'cautious' bias of technocratic judgement in both fiscal and monetary policy.
~~ARP and child poverty. A paper from the Center on Poverty and Social Policy at Columbia University analysed the potential poverty reduction effect of the economic relief proposal, finding that the ARP could cut child poverty in half.
~~US vs UK responses. Oxford Economist Simon-Wren Lewis commented on the March Budget, arguing that "next to what is happening in the United States, Sunak's policy seems totally perverse" due to a focus on fiscal consolidation rather than stimulus and recovery.
Inequalities, work and welfare
Gender budgeting guide and starter kit. To mark International Women's Day, an IMF blog profiled the "gender budgeting" approach to economic policy - collecting information on gender inequality, assessing policy through gender impact assessments and allocating resources in line with a gender equality strategy. In the UK, this approach is championed by the Women's Budget Group (see their 2021 Budget response here).
Nurses' pay. The Royal College of Nursing Union warned the government will face a public backlash if it doesn't increase the 1% pay rise, calling for 12.5% more. A poll by Opinium Research found 72% of the public think the 1% pay rise for nurses is too low, with a majority (58%) of conservative voters in agreement.
~~Cost of a pay rise. The Good Law Project's Jolyon Maugham QC argued that the annual cost of doubling the 1% pay rise for nurses is less than the amount wasted on unusable FFP2 face-masks from Ayanda and Pestfix.
~~Eighteen years of wage stagnation. In their analysis of the Budget, the IFS highlighted that wages in 2026 are forecasted to remain below their 2008 levels.
~~Public sector pay freeze. Though the details of announced pay freezes have changed, we analysed the arguments for and against freezing public sector pay in a November issue of the Digest here - including arguments against pay restraint on macroeconomic grounds and out of a need to rebuild public sector capacity.
Feminist Futures Programme. Autonomy launched a digital platform to showcase ideas from feminist voices relating to gender and the future of work, their first output being a set of interviews with five leading economists on the most pressing issues relating to work and gender.
Emergency minimum income guarantee. NEF's Lukasz Krebel and Dominic Caddick outlined the case for an emergency minimum income guarantee to safeguard against the deepening crisis of inequality in Tribune.
Economic determinants of health. Authors from MedAct wrote an article for the BMJ Opinion blog on the intersections between health and economic inequalities and the economic assumptions behind the March Budget, arguing that "misguided economic policies are missed opportunities to undo the damage of a health vs wealth legacy".
A collective bargaining strategy for trade. The union Unite has published a report arguing for a new industrial strategy for post-Brexit trade, based on coordination between workplace representatives. They argue that collective bargaining and "supply chain solidarity" can prevent "races to the bottom" on worker pay and conditions. (Tribune article from report authors here).