UK Budget Assessments
Misguided plans for Austerity 2.0 – WBG response to Autumn Statement 2022
Date Posted: Friday 25th November 2022
The financial turmoil from the last couple of months has resurrected calls for a renewed wave of austerity. But with the UK economy now officially in recession and households, businesses and public services facing the biggest rise in costs in 40 years, government support is desperately needed.
The Chancellor has decided to provide some support to families and to some public services and planned cuts to public spending from 2025 onwards, in a bid to recover financial stability and credibility by “balancing the books”.
We argue that the planned cuts are misguided and that a better way to get us onto a prosperity path would have been to strengthen the foundations of the economy by investing in public services and greening the economy, backed up by a progressive tax system. This would leave a greener and more resilient economy for future generations, saving them costs much higher than the fiscal debt that the Government is trying to avoid.
The Government announced a set of tax increases mainly through freezing tax thresholds. This was a missed opportunity to reform the system and tax other sources of income such as wealth in the same way that earnings from employment are taxed. Revenues from taxes are fundamental to funding public services. However, the Chancellor could have chosen to raise taxes in a more progressive way. Increasing tax rates, instead of freezing tax thresholds, would mean that everyone’s contribution is proportional to their income. A fairer tax structure would reduce gender inequalities and help fund public services.
High energy and food prices have generated a cost-of-living crisis which has particularly impacted lower-income households, lone mothers, disabled people, large families and women. The increase to social security rates in line with inflation is a welcome measure, as is the extension of the support with energy bills for vulnerable households. However, millions of families will still be struggling during the coming months. In order to tackle the energy crisis, we urge the government to implement an urgent investment in retrofitting homes and non-domestic buildings. In order to protect larger families, women and children from the cost-of-living crisis, we call for an increase in Child Benefit.
Health, Social Care and Education are the “protected” sectors that received a top-up to keep pace with price increases until 2023/24. However, this extra funding will be just enough to keep them afloat, without the resources needed to overcome the staff crisis and the backlog in health and care services.
Strong and properly funded public services are the key to a healthy economy and for improving living standards. Instead of the spending cuts planned for after 2025, WBG calls on the government to invest in social infrastructure to restore standards of living, tackle gender inequalities and strengthen our economy.