A tax and spend budget? Last week Chancellor Rishi Sunak announced £70bn of additional spending over the next three years, taking real term spending per head back up to 2009/10 levels by 2024. Full Budget and SR documents here.

  • Austerity repudiated. In its analysis, the IFS suggested that “fiscally speaking this year will go down as a once in a decade event...when public spending was increased across the board” - by 2024-25, an 8.3% real terms increase on 2009-10. A Keynesian-style spending budget when debt is still high and the recovery not yet consolidated could be seen as a tacit acknowledgement that austerity in 2010-13 was a mistake: the opposite choice was made by George Osborne then.
  • The tax share. Sunak’s Budget speech did not mention what was in fact its most significant measure, the rise in National Insurance contributions (subsequently to be turned into a new ‘Health and Social Care Levy’) he had already announced. As the Resolution Foundation noted in its analysis, along with the rise in corporation tax and freeze in income tax thresholds announced in the spring, this will take the share of tax in GDP (sometimes called the ‘tax burden’) from 34% to 36.2% in 2026-27. The tax share will then be at its highest level since 1950.
  • Post-neoliberalism and the free-market right. The Adam Smith Institute’s response criticised “this high-tax, big-spending budget...largely bankrupt of inspired policy”. Similarly, the TaxPayers’ Alliance took aim at the “highest tax burden in 53 years”, while the Institute for Economic Affairs was disappointed that “there is no plan to run a budget surplus in the coming years”. Political economists Will Davies and Nicholas Gane explain how the political right’s reactions to the covid-19 pandemic could signal a break with neoliberal orthodoxy ”and, in particular, from their overriding concern for the market”.

“Austerity is over, but not undone”. The IFS’s Ben Zaranko suggested that spending increases mean “austerity is over, but not undone”. Though departmental spending is set to rise across the board until 2024-25, only the Department of Health and Social Care (42.4%) and Education (2.4%) will see their Budgets higher than 2009-10 levels. In its response to the Budget, the Women’s Budget Group argues that “the increase in spending will not take most departments back to pre-2010 funding levels… nor will it repair the damage done to the public sector after a decade of successive cuts.”

Universal Credit. Another Budget measure which the Chancellor did not mention in his speech was the removal of the £20 a week Universal Credit (UC) uplift. Instead, Sunak announced that he was changing the Universal Credit ‘taper rate’, under which UC is reduced as claimants work more hours. The taper rate (which effectively operates like a marginal tax rate on income from work) would fall from from 63% to 55%. Analysts noted that this would compensate for the uplift cut for only about 25% of UC claimants. NEF pointed out that the poorest 20% of people will be receiving £380 per year less from Universal Credit than if the £20 uplift had stayed in place, pushing 300,000 more people into poverty this winter. JRF’s Katie Schmuecker said “Lowering the taper is a good thing to do, but it’s no substitute for the basic level of protection we all need social security to provide”. In his speech Sunak described the UC taper rate change as a “tax cut”. Several observers noted that, if the Chancellor concedes that the taper rate is a tax on work, it was hard to justify it being even 55%, well above the top rate of income tax. 

Distributional impacts. Economist Jonathan Portes argued that the overall impact of the Budget’s welfare, tax and spending decisions on different income deciles was “broadly progressive”, as ‘benefits in-kind’ from public services largely accrue to those on lower incomes. However, NEF’s Alfie Stirling points out that once you take into account the cutting of the £20 uplift to Universal Credit, all of the net gains in the bottom end of the income distribution are reversed. 

Rise in minimum wage. The Chancellor announced a 6.6% rise in the National Living Wage, from £8.91 per hour to £9.50 per hour, following recommendations made by the Low Pay Commission.

Local government will continue to struggle. Local governments received an additional £4.8bn of new core funding until 2025, but the IFS warned that councils are likely to struggle without additional funding from central government, since additional revenue will be wiped out by rising inflation and higher wage costs from lifting the public sector pay freeze. 

Social infrastructure. The government announced that it would fund 75 ‘family hubs’ in a £500m package to provide essential services to young families. Observers noted the resemblance to the Sure Start centres set up by the Labour Government from 1997 to 2010. Government spending cuts had forced 1,300 Sure Start centres to close over the last decade. The Women’s Budget Group argued that the Government should recognise childcare as vital infrastructure, where costs can be recouped by job creation and savings on social security; an estimated 1.7 million people were prevented from taking on more paid work because of difficulty accessing childcare.

A ‘climate-void’ budget. The Chancellor announced £30bn in green investment over four years (breakdown here.). This figure is far below than the £30bn of investment every year called for by progressive think tanks and economists in their Open Letter to the Chancellor published before the Budget. NEF’s Miatta Fahnbulleh and IPPR’s Carys Roberts both referred to this in the Guardian’s panel response. With the Chancellor cutting air passenger duty on domestic flights and freezing fuel duty again (and not mentioning the word ‘climate’ at all), IPPR referred to the event as a ‘climate-void’ budget

Weekly Updates

International cooperation and climate change

What does net zero mean? As COP26 started this week, many new countries have announced new or stricter net zero emissions targets, but how meaningful are they? Oxford Net Zero, in collaboration with ECIU and others, have produced a Net Zero Tracker, a helpful tool analysing net zero targets by countries, regions, cities and companies. Their tracker ranks each pledge in terms of whether it has a detailed plan, reporting mechanism, includes international offset credits or covers all greenhouse gas emissions.

A green economy is more equal, sustainable and resilient. Research from LSE’s Centre for Economic Performance and Grantham Institute found that green jobs are of a higher quality and pay higher wages (especially for middle and low-skilled workers) and are at lower risk of automation than non-green jobs. Further, there are fewer women than men and young people than older in green jobs, highlighting the need to address demographic imbalances in transition policies.


Managing climate-related financial risk. The Bank of England’s (BoE) Prudential Regulation Authority said it will consider forcing banks to hold extra capital (buffer requirements) to manage risks to the financial system from climate induced shocks, in its Climate Change Adaptation report. You can read Positive Money’s response from David Barmes here.

  • The politics of green finance. This indicates a change of course for the Bank of England, which distanced itself from the idea of changing capital requirements when announcing climate stress tests in June. But the BoE still stopped short from directing flows of money towards a low carbon economy, noting this was the “responsibility of government”. Economist Daniela Gabor noted that the Bank previously had “every intention to redirect monetary flows” in its programme to green its corporate bond purchases (QE).

Lobbying and supply chain finance. The National Audit Office published a report investigating supply chain finance in the NHS. The report found there was “no evidence that the predicted benefits and savings from introducing supply chain finance into pharmacy reimbursement processes in 2013 were realised”, but the Treasury approved the business case anyway due to advice from Lex Greensill. 


A plan to improve work quality. The Institute for the Future of Work (IFoW) called for a Work 5.0 Strategy to boost pay, conditions and quality of work in their response to the Autumn Budget. In the run-up to the Budget, IFoW’s Anna Thomas proposed a national strategic ‘Good Jobs Audit’, a ‘Good Work First’ pledge for public procurement, and more to tackle record job vacancies in the labour market.

  • Work quality is key to tackling labour shortages. Autonomy’s new paper with PIRC found that improving working conditions is vital for tackling labour shortages. Their research found that 3 in 4 FTSE 100 companies cite labour shortages or staff retention issues as a principal risk to their business. Over 40% of workers in the key sectors of care, hospitality and logistics report that they are considering leaving their job in the next 12 months, with low pay, long working hours and poor mental health cited as reasons for dissatisfaction. When surveyed, workers reported that higher pay, shorter hours for the same pay and better in-work benefits would prevent resignation. Read a breakdown of their results and analysis here.

Local economies and housing

Energy transition and local government. CLES have released a Community Wealth Building Energy Transition Toolkit, developed with Carbon Coop, a ‘how to guide’ to help councils deliver greener, cost-effective energy for the benefit of their communities.

Social housing and climate change. The Northern Housing Consortium published the results from its Social Housing Tenants’ Climate Jury, a collaboration between social housing tenants and providers to produce a set of recommendations to answer the question “how can tenants, social housing providers, and others work together to tackle climate change in our homes and neighbourhoods?”