The budget has been this week’s big story in UK economics and economic policy-making. Economists from across the country have provided expert insights on its promises – and pointed out what barely got a mention, including Brexit, schools, health and emerging inequalities.
Newsletter from 5 March 2021
This time last year, early March, was when stories of a distant disease suddenly began to feel much closer to home. Twelve months on, we’re all marking off personal anniversaries: last time on a plane or in a crowded restaurant; last time at the office or an in-person business meeting; last time hugging an aged relative or vulnerable friend.
So too are many of the policy-makers who’ve had to respond to the crisis. Next week, it will be a year since the World Health Organization declared the Covid-19 outbreak to be a global pandemic. And in the UK, it’s a year since the newly installed Chancellor of the Exchequer made the first of what turned out to be multiple announcements of policies to mitigate economic damage from coronavirus and the social restrictions needed to contain its spread.
Rishi Sunak was back this week with his second annual budget speech. Trailed with glossy videos from the Treasury and the BBC, as well as selective advance leaking of its contents to favoured journalists, the statement sought to assure us that support for workers and businesses would continue as we emerge from the latest lockdown. It also warned us of tax rises and spending cuts to come.
Both the Financial Times and The Economist called it a game of two halves. Chris Giles at the former described the budget as ‘a spend now, tax later affair’; and a leader in the latter teased the Chancellor: ‘Like a fiscal St Augustine, he wants continence – but not yet.’
Many of the economic experts and organisations that work with us at the Economics Observatory are key contributors to the in-depth independent evaluation of economic policy announcements like the budget, and their implications for families, firms, public finances and the prospects for recovery.
As ever, the Institute for Fiscal Studies (IFS) provided detailed pre- and post-match analysis. So too did the National Institute of Economic and Social Research (NIESR), the Resolution Foundation (which focuses on living standards of low and middle-income households), the poverty experts at the Joseph Rowntree Foundation (JRF) and, with a Scottish perspective, the Fraser of Allander Institute at the University of Strathclyde.
Many other researchers have pitched in with insightful budget commentary, including on The Conversation; the London School of Economics blogs on business and policy; and Twitter. You can read great threads from some of our contributors and editors, including Arun Advani, Michael McMahon, Ian Mulheirn and Johnny Runge.
Perhaps the most striking thing in all these discussions is what was missing in the Chancellor’s speech – and how many of the little mentioned issues have been at the heart of pandemic policy debates on the Observatory and elsewhere. They include the economics of the health impact; the effects on children and young people; and the additional economic shock of Brexit.
In response to the budget’s blind spots, IFS director Paul Johnson notes: ‘No policies to deal with the inequalities that have opened up over the last year between rich and poor, old and young, more and less well educated.’ And NIESR director Jagjit Chadha, one of the Observatory’s lead editors, laments the lack of ‘A National Recovery Plan that will tie the hands of this and future governments to lay down public policies that provide the necessary support to the private sector to meet our national economic and social aspirations.’
Protecting the most vulnerable
Economists at the Resolution Foundation and JRF point to further omissions, including adequate support for the UK’s most vulnerable individuals and households. That concern is reflected in a new Observatory piece written jointly by the two thinktanks’ chief economists – respectively, Mike Brewer and Dave Innes.
They look in detail at different kinds of vulnerability to the potential income and employment shock of Covid-19. First, people who were already in a tough financial position: those living in destitution or deep poverty; those in poverty despite someone in the household being in work; and those in debt or with no savings. Second, people whose characteristics make them more likely to be in relative poverty: ethnic minorities; people with disabilities; and single parents.
Mike and Dave acknowledge the bold measures put in place to support family incomes – the job furlough scheme, the related scheme for the self-employed, and increases in the value of Universal Credit. But as they explain, gaps in this support, combined with higher costs of living on a low income, mean that it hasn’t been enough to prevent rising hardship. In an earlier Observatory piece, Mike examined the effects on poverty and inequality.
Another vulnerable group discussed on the Observatory this week is workers in the gig economy. As Rachel Scarfe at Edinburgh shows, the fact that we all spend so much time at home has meant delivery companies have done particularly well: takeaway platform Just Eat, for example, has announced plans to hire 1,000 new couriers by March 2021.
But work in the digital gig economy has been more variable. And as lockdowns keep us at home, bookings on platforms such as Uber have plummeted. What’s more, while February’s Supreme Court ruling that Uber drivers should be classed as being in employment is likely to improve their pay and conditions, its wider applicability to precarious workers remains in question.
Elsewhere this week, we’ve explored another consequence of lockdown restrictions: more of our time spent on social media – something perhaps reflected in the extraordinary amount of online debate about the budget.
An earlier Observatory piece explored the role of emotions in our responses to times of crisis like coronavirus. This week, Larissa Marioni outlines how researchers can analyse the outpourings of emotion on platforms such Twitter, Facebook and Instagram as a way to track public wellbeing.
Sport is another thing that stirs strong emotions – or perhaps distracts us from our day-to-day worries. It’s a topic we’ve looked at before, in terms of the impact of Covid-19 on both professional sports – football especially – and grassroots participation.
This week, sports economist Bill Gerrard considers the English Premier League and whether Brexit will be a hindrance to clubs’ ability to continue signing superstars from around the world. His conclusion: fresh constraints on bringing in promising teenage footballers from overseas mean that player development and recruitment strategies will need to change. One possible upside is that we may see a resurgence of home-grown talent.
Finally, a word about what’s coming up: International Women’s Day is on Monday, 8 March. We will be marking the occasion and indeed the whole week with articles about how a year of coronavirus has affected women.
Sarah Smith, another of the Observatory’s lead editors and head of the school of economics at our host institution, the University of Bristol, will launch the series, looking across the lifecycle: from the mental health crisis facing teenage girls and young women, through the increased burden of care on working mums, to the older generation, many of whom are alone and lonely.
As always, we welcome your comments on our work – especially if you have a question to put to our experts.