‘The Treasury is taking with one hand to give away with the other’. Think tanks react to the Spring Statement

23 Mar

Centre for Policy Studies

Raising National Insurance thresholds to match Income Tax welcome

“The Centre for Policy Studies warmly welcomed the Chancellor’s landmark decision to raise National Insurance thresholds to the same level as income tax, in response to the cost of living crisis.

“This policy, the Universal Working Income, was suggested by the Centre for Policy Studies in its landmark 2018 paper Make Work Pay, and was adopted by the Conservatives in their 2019 manifesto. At the time, we calculated it would take 2.4 million people out of tax altogether.

“The CPS had recently argued that increasing NI thresholds was the best way to offset the effects of the Government’s increase in National Insurance for those on low and average incomes – but welcomed the Chancellor’s decision to go much further.”

Adam Smith Institute

Chancellor is ‘gas-lighting’ voters over his tax plans

“The big announcement today will undoubtedly be the 1p cut to the basic rate of income tax. Such a cut won’t go into effect until 2024 and Brits need relief now. It’s a cynical ploy to cut tax just in time for the next election, while at the same time hiking tax on workers through National Insurance. In terms of intergenerational inequality, lowering income tax while increasing NIC shifts the tax burden from the old to the young.

“In an ideal world, the Chancellor would have scrapped the planned National Insurance Contribution rise, although it is encouraging to see that he plans to raise the NIC threshold in line with income tax thresholds.”

TaxPayers’ Alliance

The Treasury is taking with one hand to give away with the other.

“Cutting income tax down the line will be easily offset by the upcoming national insurance hike and freezing income tax thresholds, leaving taxpayers out of pocket overall. If the government wants to give taxpayers and businesses a respite from rises, they’d do well to simply scrap the health and social care levy.”

“The alignment of income tax and national insurance is a welcome step to simplifying the tax system. The chancellor should take this chance to combine the two into a single income tax and offer a really radical reform of the tax code.”

Centre for Social Justice

The reality is this cost of living crisis is just getting started

“Today we needed to see a strategy for those struggling the most. Universal Credit remains the best weapon in Government’s arsenal to get support directly to those who will be worst hit by the spike in energy prices, while also helping claimants into work.

“Building on the profoundly welcome cut to the taper rate at the Autumn Budget, the Government should further harness the flexibility within UC to help those furthest from the labour market by investing more in the system in response to rising energy costs and the wider cost of living.”

Bright Blue

Since the Chancellor seems to be allergic to welfare, he is hamstringing himself by refusing to do what would help best

“This is the confused Chancellor. He is desperate to burnish his Hayekian credentials to his colleagues, but he has been consistently Keynesian in his response to two major crises during his short tenure, using a mixture of public spending and now tax cuts to stimulate the economy through troubled times. Public debt, tax levels and inflation will remain historically very high for the foreseeable future, much higher than what fiscally hawkish economists would advise.

The fairest way of helping households struggling with a range of costs, especially fuel and energy, is through broad subsidies such as Universal Credit or broad taxes such as VAT, National insurance or Income Tax.”

Policy Exchange

It is not surprising that the Chancellor is trying to hold on to fiscal rules

“Indeed, the Chancellor’s focus on security in this Spring Statement reveals the tension at the heart of a new culture of enterprise in these difficult economic times. In the long-term, it is the creative destruction, innovation and churn that create a resilient economy. But in the short-term, you need resilient businesses who aren’t laden with debt service costs or input squeezes to make those long-term investments. You need consumer confidence, protected by Government spending in difficult times, to power private business.

“In this Statement, the Chancellor is making the judgement that, ultimately, a moderate intervention will suffice for now, to get through the current challenges, and that too much protection, too much ‘security’ will ultimately cover up weaknesses and hamper the dynamic economy the Chancellor is so eager to create. This is perhaps the biggest call of all, and we should all hope he is right.”

Institute of Economic Affairs

This was a mitigation mini-Budget, not a radical one

“The reduction in fuel duty will make a small difference to households. The decision to raise the National Insurance threshold means workers on an average wage will see their contributions fall, despite the planned 2.5 percentage point rise going ahead. The pledge to reduce the basic rate of income tax is welcome.

“But the UK will spend £83bn on debt interest this year – almost double our entire defence budget. The Chancellor will not achieve economic ‘security’ without a commitment to drastically bringing down our tax bill and reducing government spending, which has spiralled out of control. Only then will he boost our anaemic growth forecasts.”

Onward

Time is running out if the Chancellor wants his economic plan to be felt before the next election

“Today’s statement was a firefighter’s statement. The Chancellor has warned about inflation since he entered the Treasury and today his warnings were realised. The 5p cut to fuel duty and the rising threshold for National Insurance contributions offer considerable protection against spiralling inflation, especially for those on the lowest incomes – and, from 2024, he ensured that voters will keep an extra penny from every pound they earn.

“Critics will say he should have scrapped the planned National Insurance rise. But doing so would have meant finding £12 billion elsewhere for the NHS and social care, or explaining to voters why they must wait months for operations in the run up to a general election. Ultimately this left him with no easy choices.

“But while voters recognise that the Chancellor is fighting fires on all fronts, he cannot lose sight of why the Government was elected back in 2019 – to level up opportunity across the UK. Today’s statement had positive language on capital investment, R&D and apprenticeships, but scant detail and no decisions until the Autumn.”

Conservative Environment Network

Today’s Spring Statement will help people cope with rising household bills 

“Scrapping VAT for insulation will help people upgrade their homes and reduce their energy bills. This quick and simple tax cut will help families with soaring gas prices. The Chancellor should also look to expand existing energy efficiency schemes to help fuel poor households insulate their homes.

In the short term, a fuel duty cut will soften the blow of rocketing oil prices, helping motorists and cutting the cost of transporting goods across the country. But the crisis underlines the need urgently review the UK’s road taxes.

As people switch to electric vehicles, which will reduce the UK’s dependence on expensive oil imports, road taxes like fuel duty will need to be replaced. This is an opportunity to deliver a fairer deal for motorists and cut congestion while raising revenue for excellent public services.”

Joseph Rowntree Foundation

Chancellor has abandoned many to the threat of destitution, not economic security

“The Chancellor has acted recklessly in pressing ahead with a second real-terms cut to benefits in six months, while prioritising people on middle and higher incomes.

“Changes to National Insurance won’t help those who aren’t working or can’t work due to disability, illness or caring responsibilities, and exposes them to an increased risk of becoming destitute. This means they will face regularly going without absolute essentials such as food, energy and basic hygiene products.

“We can’t build a strong or secure economy by weakening the incomes of the poorest. With benefits reaching their lowest level in real terms since 1985, the Chancellor had ample opportunity with his increased headroom to uprate them in line with inflation to protect those most at risk.”

Institute for Fiscal Studies

If he wants to be remembered as a tax reforming chancellor, so far he is headed in the wrong direction

“There are two paradoxes at the heart of today’s statement. The Chancellor has managed to announce tax cuts without reducing the planned tax take from previous plans. And by saying nothing about spending, he is reducing the real-terms generosity of his plans for spending on public services. That’s what inflation does.

“The cuts to income tax and National Insurance are effectively paid for by increasing revenues as a result of fiscal drag. The freezing of the income tax personal allowance and higher rate threshold turn out to be much bigger tax rises than first intended. As a result, almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this parliament’s reforms to income tax and NICs, despite the tax cutting measures announced today.

“And by keeping to previously announced cash plans for public spending Mr Sunak is being considerably less generous to public services than he intended when he set out his spending plans in the Autumn.”

Helen Barnard: Poverty is spiralling out of control in this country. It’s time for the Government to get a grip.

19 Jan

Helen Barnard is Associate Director at the Joseph Rowntree Foundation and Research and Policy Director at Pro Bono Economics.

With the current febrile political atmosphere, it’s easy to lose sight of the serious challenges facing the country. But the Government and the Conservative Party need to recover their focus and get to grips with these if they want to not only secure another election win, but fulfil their commitments to the country.

This week saw the publication of a new state of the nation report from the Joseph Rowntree Foundation. It lays bare a challenge that should be at the heart of this reset: the increasing number of children growing up in deep poverty.

Since 2012/13, poverty has been rising among both children and pensioners. Almost third of children how live in poverty, up by four percentage points. This is bad enough, but even more worrying is the fact that a rising proportion are living in deep poverty, with incomes so low as to be completely inadequate to cover the basics. 1.8 million children are in families trapped in this position – an increase of half a million between 2011-12 and 2019-20.

And for many, poverty is not a fleeting experience – the hardship and fear it causes can last for years. The report highlights large numbers of children in persistent poverty in the years running up to the pandemic. Around one in five children have lived on a low income for at least three of the four years between 2016 and 2019. For young children, living in a family that is going without the essentials is all they will ever have known.

Worst of all, the research finds that destitution – the very deepest poverty in the UK – has risen extremely sharply in recent years. 2.4 million people, including 500 000 children experienced destitution in 2019, a rise of more than a third since 2017.

The cost-of-living crisis is rightly at the top of the political agenda and is likely to stay there. Higher prices in the shops and massive increases in energy bills will undoubtedly feel challenging for many people across the country. But it is those who are already struggling to afford the basics or are teetering on the brink of hardship and debt, who should be our priority.

In 2019, the Conservative manifesto promised to reduce child poverty. On January 5 this year the Prime Minister said that “the Government is determined” to “support the poorest people”. These are the right commitments, but we are already seeing signs that the dire situation laid out in this report is getting worse.

In many places, charities are bearing the brunt of the escalating crisis. A survey before last Christmas found that three quarters of charity leaders were worried staff were at risk of burnout. They had already seen demand rising and expected pressure to build further into this year. Crisis estimates that over 200,000 families are experiencing homelessness. Food banks are recording record rises in demand. We hear about families unable to afford beds for their children. There was recently a news story about a family who had to move a lightbulb around their temporary home because they couldn’t afford more than one.

The situation was made worse by the Chancellor’s decision in last Autumn’s Budget to cut social security support for those out of work to the lowest level in 30 years. It was hugely encouraging to see him invest in Universal Credit and boost help for workers on low incomes. However, the choice to direct that additional funding solely towards those able to work has left large numbers of the very poorest families unable to keep up with bills and horribly exposed to the price rises to come.

In the short term, the Government needs to step in and protect those facing the greatest hardship over the next few months, as inflation climbs to six per cent and energy bills rise by between 40 and 50 per cent. Energy bill hikes will affect large parts of the country, but for those on middle incomes, they will only take up around six per cent of their income.

By contrast, low-income households will be spending nearly a fifth of their income on energy, with some on the lowest incomes finding over half of their cash eaten up by energy costs. With budgets already stretched beyond coping, many will have no choice but to stay cold and go hungry. Targeting additional support towards those facing the greatest hardship (for instance through a one-off grant for all those on Universal Credit, legacy benefits and Pension Credit) would be a far better use of public money than a thinly spread VAT cut.

Just as importantly, we must get to grips with the underlying drivers of rising and deepening poverty. Over the last decade, we have largely succeeded in getting those who can work into jobs. But too many of those jobs have not protected people from poverty. This is not just about the level of hourly pay – workers at high risk of poverty are often stuck in part time and insecure jobs. Using the promised Employment Bill to increase job security for those at the bottom of the labour market would be a significant step forward. Opening up better quality, better paid jobs to people who need to work part time would massively boost the prospects of disabled people, parents and carers.

Reducing costs is just as important as boosting incomes. A million private renters are stuck paying rents they can’t afford and thus far polices to increase home ownership and make renting more affordable have failed to help. Investing in social housing could free 600,000 people from poverty, as well as rebooting a genuine pathway to ownership for those on low incomes. Tackling high energy costs is harder, but better regulation of the energy market (with Ofgem’s failures starkly set out in this Citizen’s Advice report), increasing the UK’s storage facilities and going further and faster on energy efficiency measures would all help.

And we must revisit the question of the adequacy of support for those who cannot work or can only work a low number of hours. As Baroness Stroud argued after the Universal Credit cut last Autumn – “as well as rewarding work, our welfare system must always protect society’s most vulnerable.” It cannot be right that we have allowed our social security system to be eroded so far that it traps disabled people, carers and children in such hardship.

Budget 2021: Think tank response round-up

3 Mar

Centre for Policy Studies

Robert Colvile, Director – ‘Should help business and the economy rebound powerfully’

“The combination of business rate reductions, investment incentives and other measures should help business and the economy rebound powerfully in the next few years – and we are pleased to see our proposal for free ports at the heart of the Chancellor’s speech. But there is the danger of a cliff edge later on as support is withdrawn and taxes increased – or that businesses will anticipate higher taxes and fail to invest.

“Britain still has a huge problem with its long-term growth rates – as the latest OBR figures show only too clearly – and the tax burden is set to increase inexorably. We appreciate that the Chancellor needs to balance the books. But the great challenge facing the Government is not just to put the economy back on an even keel in the short term, but put in place permanent pro-growth measures that raise growth rates for good.”

Institute of Economic Affairs

Mark Littlewood, Director General – ‘A barrage of short-term costly measures’

“After months of damage inflicted by the pandemic and lockdown measures, the Chancellor had the opportunity to deliver a pro-business, pro-growth Budget by lowering and simplifying taxes and slashing unnecessary regulations.

“Instead, we received a barrage of short-term costly measures which risk depressing economic growth, reducing employment, hampering entrepreneurialism, and ultimately harming the long-term economic recovery. Dialling up taxes was a mistake, and our economic growth will be less impressive as a result.”

Adam Smith Institute

Matt Kilcoyne, Deputy Director – ‘The most serious attempt to rebalance the economy a Chancellor has made’

“Rishi Sunak’s super deduction will induce investment into Britain’s factories and help businesses bounce back and Britain’s economy boom as we leave the pandemic behind. We’d estimated at 100% full expensing would be worth over £2,214 per worker, going beyond that is a bold move to help the private sector build the recovery. It will benefit most those areas that have been left behind in recent decades. It is the most serious attempt to rebalance the economy a Chancellor has made and it is truly welcome.

“Rates relief and employment support will be welcome while the ability to operate and raise revenue remains suppressed even as we leave lockdown. But the success of vaccines means the economy will reopen and activity will return; the government cannot continue propping up our economy indefinitely. Moving forward, the strategy should be to get the state out of the way, by lowering taxes to encourage investment and cut red tape that hurts entrepreneurs.

“The Chancellor was right to say that the state should not be borrowing to pay for everyday public spending. But it’s hard to square that circle with a new commitment to guarantee mortgages of first time buyers. This is a Fannie Mae and Freddie Mac guarantee to boost the demand side — without a credible plan to boost supply of new homes in the places people want to live we’ll just end up with another housing bubble and the risk of boom and bust.

“Keir Starmer was right to remind the Conservative Party that the proper basis on which to make tax decisions is economics not the political cycle.”

TaxPayers’ Alliance

John O’Connell, Chief Executive – ‘Big tax hikes risk choking off the recovery’

“There were some wins for taxpayers today, but it doesn’t gloss over the fact that this was a tax-raising budget.

“The chancellor is helping to rescue struggling sectors but £30 billion worth of tax increases will hit hard-pressed households and businesses already under the highest tax burden in 70 years. 

“Big tax hikes risk choking off the recovery Rishi wants before it has even started, so let’s hope that other measures in the budget help to boost jobs, spur investment and ultimately revive the economy.” 

The Entrepreneurs Network

Sam Dumitriu, Research Director – ‘Chancellor needs to think hard about fundamentally reforming how international profit is taxed’

“A higher corporate tax rate will discourage investment and make the UK less competitive internationally, so it is right that the Chancellor has combined it with a new 130% Super Deduction for investment.

“However, when the two years are up and Corporation Tax rises to 25%, the UK will fall far down the list on international tax competitiveness. Although, we currently have a low headline rate, the effective rate that businesses actually pay is mid-table by international standards due to stingy capital allowances.

“To avoid an investment slump, as the OBR forecast, when the Super Deduction expires, the Chancellor should allow businesses to write off the full value of their investments – the so-called full expensing he mentioned at the despatch box.

“But a high rate, even with full expensing, increases the incentive to engage in sophisticated tax avoidance and shift headquarters. To counter that, the Chancellor needs to think hard about fundamentally reforming how international profit is taxed.”

Centre for Social Justice

Edward Davies, Policy Director – ‘A huge help to those working low-paid jobs’

“We are pleased the Chancellor is extending the £20 uplift in Universal Credit for another six months. Universal Credit is a lifeline for the poorest people in the UK and today’s decision will make a significant difference to many people.

“Likewise, the announced increase in the National Minimum Wage to £8.91 an hour from April is also welcome and will be a huge help to those working low-paid jobs.”

Joseph Rowntree Foundation

Helen Barnard, Director – ‘Makes no sense and will pull hundreds of thousands more people into poverty’

“It is unacceptable that the Chancellor has decided to cut the incomes of millions of families by £1040-a-year in six months’ time. He said this Budget would “meet the moment” but this decision creates a perfect storm for the end of this year, with the main rate of unemployment support cut to its lowest level in real terms since 1990 just as furlough ends and job losses are expected to peak. This makes no sense and will pull hundreds of thousands more people into poverty as we head into winter.

“Even before Coronavirus, incomes were falling fastest for people with the lowest incomes due in large part to benefit cuts. Ministers know this short extension offers little relief or reassurance to the millions of families, both in and out-of-work, for whom this £20-a-week is helping to stay afloat. This cut to Universal Credit will increase hardship when the economic crisis is far from over and undermine our national road to recovery.

“It is not too late for the Chancellor to do the right thing: announce an extension of the £20 uplift to Universal Credit for at least the next year. It is also totally indefensible that people who are sick, disabled or carers claiming legacy benefits continue to be excluded from this vital support. The Government must urgently right this injustice.”

Resolution Foundation

Torsten Bell, Chief Executive – ‘Need to see wider economic stimulus to drive the recovery’

“It’s welcome that the furlough scheme which has seen British workers through this crisis will remain in place until restrictions are lifted, playing a critical bridging role between the lockdown and the recovery. The phased tapering off over the summer will also avoid a risky cliff edge.

“But the peak of unemployment is ahead rather than behind us. We also need to see wider economic stimulus to drive the recovery this autumn, and support for the millions of people who have been without work for long periods during this crisis.”

Institute for Fiscal Studies

Paul Johnson, Director – ‘A big reversal of decades of policy direction and a significant risk’

“What we can be sure of is that Rishi Sunak has spent big again, extending some support right through 2021 at a cost of an additional £60 billion or more. As a result borrowing is now forecast to again be above 10% of national income in the coming financial year. Whether the big fiscal tightening planned for subsequent years will actually happen is less certain. It continues to depend on spending being lower than planned prior to the pandemic. And it also depends on a large increase in corporation tax actually being implemented without additional measures to at least ease its long-run impact. Make no mistake, this proposed increase in the main rate of corporation tax is a big reversal of decades of policy direction and a significant risk. For all the rhetoric about it leaving the headline rate here below that in other G7 countries, our effective tax rate will be relatively high.

“Mr Sunak made much of his desire to be honest and to level with the British people. The fact that he felt constrained to raise taxes by hitting companies and through freezing allowances, rather than through more explicit rises in people’s taxes, suggests there are limits to how far he wants to level with us as he attempts to raise the overall tax burden to its highest sustained level in history.”

Bright Blue

Ryan Shorthouse, Chief Executive – ‘The Government has yet again foolishly cut, rather than maintained, the value of the cost of Fuel Duty’

“The Chancellor has been refreshingly generous, adaptive and pragmatic in his response to the economic havoc caused by Covid-19. He is right to extend the flagship furlough scheme until the autumn, gradually phasing in increased employer contributions. It has saved the livelihoods of millions of people. Indeed, considering its success, the Government might consider an adaptation of the furloughing scheme for future crises for businesses and workers – a government-supported insurance scheme requiring employer and employee contributions.

The Chancellor is right to set out how this Government will get a grip on the public finances in the coming years, but postpone action until the years ahead. However, this makes the decision to cut the international aid budget and public sector pay in the coming fiscal year, as announced last autumn, odd and unnecessary.

“There was an agenda that was notably lacklustre in the Budget. In the year of COP26, this was meant to be the year that we trigger a post-Covid green recovery. But the Government has yet again foolishly cut, rather than maintained, the value of the cost of Fuel Duty for drivers of petrol and diesel vehicles. And it still lacks the ambitious and necessary policies to support more people with the path to net zero, especially in the way they drive their cars and heat their homes.”

Spending Review 2020: Think tank response round-up

25 Nov

Adam Smith Institute

Matt Kilcoyne, Deputy Director:

“The Chancellor set out plans for big-spending and big-borrowing to get the country through the pandemic, and set the course for the country in the years ahead. It is necessarily expensive to confront the Covid-19 pandemic. But this public sector spending splurge fails to put the United Kingdom onto a strong fiscal footing for the recovery. Rishi Sunak cannot tax our way out of debt or spend our way out of a recession. 

“Increasing departmental budgets as the economy shrinks is just spending money we don’t have. It is fair that while private sector wages have fallen, public sector wages do not rise. Every public sector worker does not automatically deserve a pay rise while the rest of the UK loses out. 

“Raising the minimum wage during a recession will hit the most vulnerable the hardest by preventing businesses from hiring out-of-work Brits. It risks fewer jobs and hours for the lowest skilled, young, and minority workers. For the party of business, the lack of thought about their needs and the increase in costs they’re facing coming from the government, this is a massive and unforgivable oversight.”

Institute of Economic Affairs

Mark Littlewood, Director General:

“The Chancellor’s diagnosis was correct – and it is encouraging that he grasps the scale of the problem. The eye of the economic storm has yet to hit. The Covid contraction is more than double that of the Great Depression in 1931. Five years from now our economy will be smaller than it was at the start of 2020.

“If the diagnosis is good, the medicine is inadequate. ‘No return to austerity’ is a good slogan, but austerity there will be – either in the public or the private sector. It is just a question of when, and the longer the delay the more austere it will be.

“While today was a Spending Review rather than a Budget, the Chancellor must swiftly turn his attention to mapping out a path to recovery. This will involve creating a better tax and regulatory environment, so businesses can bounce back and thrive.”

Centre for Social Justice

Edward Davies, Director of Policy:

“Amidst the eye-watering barrage of numbers, the focus first and foremost on jobs, was the right one. It is not just important for the recovery of the economy but as the Chancellor said, a job is the best route to personal prosperity – an identity, purpose, and reason to get up each morning. Various investments in housing, city growth deals, and a very welcome community levelling-up fund will all help to enable this.

“And for those out of work the announcement of the £3bn Restart Programme is welcome too. This can build on and expand the Work Programme and Work and Health Programme. But it must be personalised and human, as per the original design of Universal Support, to go alongside Universal Credit. As the Shadow Chancellor said it must address the needs of those furthest from the job market and work with the small local actors, who know their communities best.

“Lastly, support for the most vulnerable such as rough sleepers, and our prisons was welcome, but warm words on families and communities, where many find their greatest support, must be followed by action.”

TaxPayers’ Alliance

John O’Connell, Chief Executive:

“The lack of focus on value for money in today’s spending review will no doubt disappoint taxpayers.

“Coronavirus has undeniably left a large hole in the nation’s finances. But instead of forever dipping back into taxpayers’ pockets, the government should prioritise policies to get the economy going.

“With the tax burden at a 50 year high, targeted tax cuts will be vital for employment, productivity and, ultimately, economic growth.”

Centre for Policy Studies

Robert Colvile, Director:

“Today’s spending review recognises the extraordinary scale of the Government’s fiscal response to the pandemic, but also the extraordinary and long-lasting economic damage that it has inflicted.

“It is right to prioritise jobs, health and public services now, rather than immediately closing the deficit, but also right to acknowledge the enormity of the challenges ahead. The temporary cut to international aid and the imposition of public sector pay restraint, both called for by the Centre for Policy Studies, recognised this changed environment – but the country is still committed to increasing spending on a shrunken tax base.

“The Chancellor’s announcements on infrastructure investment and levelling up were extremely welcome, echoing for example the CPS’s proposal for a National Infrastructure Bank. But ultimately it will be the private sector, not the public, which digs us out of this economic hole – so as the pandemic recedes we urge the Chancellor to embrace pro-growth, pro-enterprise stimulus measures, such as tax incentives to encourage businesses to hire and invest.”

Joseph Rowntree Foundation

Helen Barnard, Director:

“Remarkably for a much-hyped statement on levelling up opportunity across the country, the Chancellor’s word’s ring hollow as weaker local economies will be getting less money than previously in the aftermath of the pandemic.

“The growing numbers of people in or at risk of being pulled into poverty in our country will have taken little solace from the plans laid out by the Chancellor today. The latest economic forecasts are stark and deeply troubling.

“Behind the figures there are real families wondering how they will get through this winter and beyond. The Chancellor has not risen to the challenge facing the nation. In the here and now families need to know how they will pay for food, childcare and keep a roof over their heads.

“The Chancellor has failed to live up to their manifesto commitment to invest significantly in skills around the UK and allow the funds to be administered locally via mayors, devolved administrations and local authorities. The additional funding for employment support is eye catching and necessary because of the anticipated wave of long-term unemployment in the coming months.

“There is mounting concern in the UK about tackling poverty and inequality, and the time to tackle these issues is now, as we recover from a crisis which has already hit the worst off hardest. This was a moment when the Chancellor could have taken action to solve poverty – instead many families will now be preparing for still harder times ahead.”

Resolution Foundation

Hannah Slaughter, Economist:

“The Chancellor has confirmed a modest increase in the National Living Wage for next April – the smallest since 2013. After large increases in recent years, the slowdown reflects that the wage floor is rightly linked to typical earnings which have taken a hit during the crisis.

“Crucially, this increase still leaves the Government on track to abolish low pay by the middle of the decade, with one of the highest minimum wages in the world.

“Continuing on the path towards ending low pay – with bigger rises in the National Living Wage coming as earnings recover – should form part of a wider post-Covid settlement for low-paid workers, including more dignity and security at work.”

Paul Maynard: Our political problem with free school meals isn’t happening by accident. We are failing to focus on life chances.

27 Oct

Paul Maynard was Parliamentary Under Secretary of State at the Department for Transport from July 2019 to February 2020. He is MP for Blackpool North and Cleveleys.

With over six thousand children eligible for free school meals in Blackpool North & Cleveleys, tackling food poverty – whether during the school holidays or more generally – is extremely important. It is the ultimate example in politics of where people cry “something” must be done. However, in our topsy-turvy, helter-skelter Parliamentary trench warfare, these issues very quickly morph into one side arguing “anything” should be done if they can paint the other in a poor light.

No-one should have been surprised at either the criticism which came our way (even those like me who abstained in protest) after the free school meals debate, nor the voluntary movement that stepped into the gap as a manifestation of popular disapproval.

If the question was whether the disruption the pandemic had caused, which led to the extension of provision over school holidays in the first place, had sufficiently returned to normality (with schools and school kitchens open again) to go back to not having free school meals, then the answer was no, especially as areas like this entered the instability of Tier Three once more.

A lack of empathy in some comments meant most people’s takeaway is that we want to abolish free school meals altogether, which is a shame given we extended them to sixth forms and introduced universal infant free school meals.

We sort of had advance warning of the storm. A similar debate had occurred that led to us expanding the scheme over the summer holidays. We had a period when we could have developed policies to ensure that the right support reaches the right children and, most importantly, in the right manner to have the impact required. We would have been able to introduce a genuine, long-lasting change in support which would endure beyond merely extending a voucher scheme (that Labour were critical of previously) every time we had a school holiday.

The summer holiday support cost some £120 million extra. At the same time, we invested some £5.7 billion more in a Universal Credit uplift, and a further £1 billion in increasing local housing allowance. It is also worth noting that eligibility for universal credit covers far more children than the much narrower eligibility for free school meals does.

All of this extra money is supporting the financial resilience of many families in my constituency at a time of real and growing insecurity due to the devastating impact on Blackpool’s hospitality sector when it went into Tier 3. And yes, it’s right to look at things in the round and ask how we make that money work harder.

As a first step, we need the bare minimum of a national and universal summer holiday activity and food support scheme. It is important for children to retain a link with an outside body during the longer summer break when child neglect as well as food poverty can increase as school supervision and support decreases. Such a scheme would also diminish the risk of them losing some of the learning that they have acquired during the academic year.

But this issue illustrates our wider challenge on social policy. Our life chances agenda gets put to one side, we fail to extinguish our burning injustices, because “something else” always comes along. Instead, we don’t just need to build back better with economic policy, but use the challenges of the pandemic to address social concerns too.

The policy chief of the Leader of the Opposition, Claire Ainsley, observed, in her previous role with the Joseph Rowntree Foundation, that “strong families able to withstand the shocks of personal change and external pressures such as job loss are vital”.

She was clear, as I am, that strong families matter. We need to return a sense of agency and autonomy to the lives of some of the most disadvantaged in society—people who have had their ability to make choices about how their lives are structured taken away from them by systems that they have not designed. I am talking about choices that most of us take for granted.

Politics is not something that we should do to people; it is something that we do with people.

We keep on trying. Our heart is in the right place. A 2015 manifesto focused on life chances. A new Prime Minister talking about burning injustices as she entered Downing Street. A 2019 election victory whose foundation is a whole new demographic cohort of supporters.

But we put all this to one side because something else “more important” comes along to deflect us. We are, I fear, fast reaching a point, to quote Keith Joseph from back in 1997, where our policies and performance no longer match the analysis and principles on which millions have backed us in past general elections.

Strivers, Battlers, Just About Managings litter recent political history. We find ourselves starting to segment the group, divide it up into smaller groups, or add other suddenly-important groups to the wider group. This is perhaps unsurprising in a society which is more individualistic than ever before, and where people’s identities are no longer rooted simply in class or social status – indeed where their identities are ever more rooted in their immediate community.

Essentially, we are identifying a broad group hitherto ignored by the elite, and demonstrating we care through a constant narrative, underpinned by policy justifying that narrative.

Ainsley, who I referred to earlier, describes this group as being on average or below incomes, in poverty probably one year in three – a “precariat”, in that they struggle to maintain let alone improve their socio-economic status. Almost exclusively reliant on public services (and engaging with them on a more frequent basis), renting privately with often unstable tenancies, exposed to volatile market forces in an insecure working environment – we may think their world is somehow not a Tory world.

But they also value family, fairness, hard work, decency and orderly structure – the Tory double helix. They are a group who feel politics has not worked for them and their interests for many years, under governments of all political parties. This is compounded by their view that their children are likely to fare less well than they did, and feel their status endangered by the ‘hourglass’ economy.

How do we tackle decreasing social mobility and the slow decline of in-work progression for those on lower pay rates? Our language focuses on improving social mobility, and we lament it is not increasing. But we never discuss how it might be diminishing and how downward mobility, like grains of sand in the hourglass economy, is actually more likely for many in the “precariat” or second generation immigrants. Ainsley cites one study of low paid workers suggested only one in six would climb out of their low paid roles over the course of a decade.

For Conservatives, at the heart of these issues is not just the challenges above, but also how to protect people not from bad decisions they may sometimes make, but rather the structures that aggravate the penalty paid for poor decisions, which can sometimes tip people over into extreme poverty when the unexpected occurs.

Then there is the larger question of how we reconnect communities to the wider economic health of the nation, and give them a stake in future growth by ending their relative isolation from many of the beneficial consequences of wider government policy.

For all that, the Government must move much more quickly to fill what has now become a policy vacuum. Free school meals is an issue which has cut through. Departments deserve credit for thinking around the issue – the building blocks are there from the DfE’s Holiday Hunger Pilots, to DEFRA’s National Food Strategy to DHSC’s work on improving take up of Healthy Start Vouchers.

I’ve written before on ConservativeHome about how department silo thinking means cross-departmental issues, however important they are, struggle to get momentum. What could be more critical right now alongside restarting economic growth than tackling some of the fundamental structural challenges that would diminish food poverty?

Failure to do so will just lead to technocratic-sounding, misguided-but-benevolent Labour policies around an emblematic “right to food” set out in legislation or a big-brother National Food Service. The lessons since 1945 are that if we Conservatives don’t get it right, someone else will try, and get it wrong.