BUDGET 2021: Chancellor gambling on ‘rosy’ recovery forecast to duck the full budget boost the UK economy needs
Sunak’s plan offers only half the stimulus needed to put UK on best pathway to jobs, growth and restored public services
The IPPR think tank has responded the chancellor’s budget statement by welcoming extended support schemes for jobs and businesses but challenging the limited size and scope of the stimulus, and over-optimistic expectations for the UK recovery.
Carys Roberts, IPPR Executive Director, said:
“The chancellor is gambling on a highly optimistic scenario from the OBR, which presumes that the pandemic has done so little permanent damage to the economy that it can simply bounce back.
“This rosy view ignores the huge underlying problems we face - 40 per cent of households have lost savings and won’t return to spending as before. Some 600,000 firms don’t have enough cash to survive the next three months, and are already loaded up with debt.
“All in all, the scenario used by the chancellor amounts to betting on a ‘trickle down’ recovery led by high earners and big businesses. This would be a huge mistake.
“He has delivered only around half the £190 billion stimulus we think is needed to ensure the fairest and strongest recovery possible – equivalent to 8.6 per cent of the UK economy, and close to the 8.9 per cent package planned by the US president. He should instead be boosting it like Biden.
“We welcome the extensions of job and business support schemes which we have been calling for, and which serve as planks to prevent economic hardship. But there was a striking lack of new support for public services, little public investment and no lasting boost to welfare for those hit hardest by the crisis.
“The result is the risk of a lopsided recovery, where higher earners and big businesses bounce back quickly, but low earners and small businesses will feel the dire consequences of the pandemic for years to come.”
NOTES TO EDITORS
- This month the IPPR Centre for Economic Justice called for the chancellor to ‘boost it like Biden’ with a £190 billion UK recovery stimulus. The research, by Dr George Dibb, Carsten Jung and Dr Parth Patel, is available here: https://www.ippr.org/research/publications/boost-it-like-biden
- The Centre for Economic Justice also published research this month revealing that 600,000 firms and 9 million jobs are at risk without further support. The analysis by Dr George Dibb and Carsten Jung is available here: https://www.ippr.org/blog/employers-at-risk-of-bankruptcy-without-further-support
- Last week the Centre for Economic Justice argued that some tax rises alongside a big stimulus would put the post pandemic economy on a stronger footing and raise up to £55 billion. The research by Carsten Jung and Shreya Nanda is available here: https://www.ippr.org/research/publications/tax-and-recovery
- The landmark 2018 IPPR Commission on Economic Justice established a blueprint for a fairer and stronger economy. Among its 72 recommendations were a number of tax reforms including a rise in corporation tax. The final report of the commission is available here: https://www.ippr.org/research/publications/prosperity-and-justice
- IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence. www.ippr.org