A budget that could have been something
Yesterday, 3 March 2021, Chancellor of the Exchequer Rishi Sunak, announced his Spring budget. With Government borrowing skyrocketing, GDP plunging by ten percent over the last year, and many sectors desperately clinging to the hope laid out in the recovery roadmap announced on 22 February, this was an eagerly anticipated budget.
Speaking after his BIG Budget event, which gave live analysis of the budget, Marco Gundermann, Subject Leader for Economics, International Relations and Development, shares his thoughts as the economic, and political dust, settles after the announcement.
“In the run-up to the budget, economists and the public, had many questions about what could feature in the budget – are we returning to austerity or building back better? Is the chancellor of the exchequer as bold as Biden, will furlough extend, will the housing market be kept buoyant with a long stamp duty holiday? Now we have the answers.
“I believe Rishi Sunak has been cautiously bold in his budget, but the main direction of travel is back to austerity. This becomes clear when looking at the debt predictions. 17% this financial year, becomes 10% the next financial year, which will still have lockdowns and then goes down to 4.5% the next. Overall debt is meant to peak at 97.1% of GDP in 23-24. How? Through spending cuts, especially if reports that the chancellor plans tax cuts before the next general election ring true. It seems we have not learned from austerity or the state of society revealed by the Covid crisis. All that clapping in the summer months hasn’t translated into pounds and pennies in public sector pay packets.
“The UK’s Gross domestic product (GDP), the monetary measure of the market value of all the final goods and services produced, is expected to increase by 4% this year, but in five years it will still be 3% smaller than it would have been, and it will take until the middle of next year to reach pre-Covid levels of GDP, some 18months to build back… to normal. Brexit has already reduced GDP in the first quarter alone by 0.5% and long-term productivity is expected to be 4% lower.
“With the measures announced in the budget, the total COVID support spending is in the region of £407Billion. But, despite all this support, 70 0000 people have lost their jobs, with unemployment expected to peak at 6.5%, that’s before key industries which are still on ice, begin to try to build back.
“The plasters of extending furlough, the universal credit increase, VAT and stamp duty relief will not give the financial space, certainty, and optimism needed for a sustainable recovery addressing the pressing needs of today. A public pay freeze for those earning 24k and above, and the freezing from next year of the allowances for income and other taxes, while inflation is likely to make a comeback and future spending cuts are too likely in my view to return us to the agony of a decade of austerity.”