Andrew Westwood suggests that the budget on Wednesday could offer a crocus of hope
Now that we have a roadmap and the possibility of ‘normal’ life returning by the summer, will this week’s budget signal the eventual return to ‘normal’ politics and policymaking? That will depend heavily on successfully containing the virus and continuing vaccinations. But even if life feels much more familiar by the summer, the economy will not return to normal for some time yet.
According to the National Institute of Economic and Social Research, the recession—however short—will leave long-term scarring. By 2025, it forecasts GDP to be 6 per cent lower than expectations before the pandemic, on top of an already weaker trend related to Brexit.
Figures from the Office for National Statistics show that unemployment in the UK rose to 5.1 per cent in December, with 1.74 million unemployed. Over 700,000 fewer people are employed than at the start of the pandemic—and nearly three-fifths of this fall has come among those under 25. Some five to six million workers remained on furlough this January—nearly 20 per cent of the workforce.
1930s revisited
The National Institute of Economic and Social Research says that the extreme poor in different regions are very vulnerable; it projects huge effects on the poorest households in the north-west, while London, the east of England and the south-east will also have substantial increases in destitution. Let’s just stop for a moment and repeat that word: destitution. This is a crisis of 1930s proportions and we are still in the policy terrain and language of New Deals and how to tackle soaring levels of unemployment and poverty.
So there will be—and must be—extensions to furlough and Universal Credit, at least until the autumn. There will—and must—be more measures for boosting job creation, especially for the young. The state cannot withdraw support or its active role yet.
Chancellor Rishi Sunak has plenty of cover, with the International Monetary Fund, the OECD and the World Bank all saying that now is not the time to try to start balancing the books. But this remains a strange and unfamiliar place for both him and the Treasury. They will hope that global markets and the voting public are optimistic about a new era of acceptable, manageable debt and new fiscal rules—but inside they will know that the crisis is going to shape spending over the next decade.
All regions in the UK experienced a decline in gross value added in 2020, but some have suffered more than others. London, the south-east and the south-west will recover quickly. Northern Ireland, the north-east, the west midlands and Wales will suffer from much longer-term effects. Levelling up is getting harder, not easier, so Sunak will no doubt be keen to remind us that the government has a wide range of plans that can now be brought out of cold storage, unleashing the potential of Global Britain. International trade secretary Liz Truss may even be on hand to announce a trade deal with Argentina or New Zealand. More beef, sheep and cheese.
R&D, vaccines and bootcamps
But moving on to much more positive things, the budget will provide an opportunity to talk about the importance of boosting R&D after Covid-19 and Brexit. R&D is a territory the Treasury gets and, if most budgets of the past two decades are anything to go by, chancellors too. The planned Advanced Research and Invention Agency is likely to get a mention and maybe even an early boost to its budget, beyond the £800 million already committed in the autumn spending review.
There will, of course, be much talk of the vaccine taskforce and the active and independent (post-Brexit) state securing hundreds of millions of doses (and of surpluses committed to and counting towards official development assistance). Sunak will rightly heap praise on Oxford’s scientists and, if he’s smart, on the long-term contracts securing manufacturing capacity in places such as Stoke, Teesside, Livingston and Wrexham. The Treasury did, after all, find the money.
Perhaps Sunak will be as bullish and as keen to defend the mass purchase of personal protective equipment as Matt Hancock, pointing out that even if it involved some suboptimal procurement, the proportions manufactured in the UK have, according to the Financial Times, risen from 1 per cent at the beginning of the pandemic to some 70 per cent today. That is an extraordinary shift from global to domestic manufacturing. In the United States, president Joe Biden has this week commissioned a similar approach, with ‘100-day reviews’ of defence, medical and food supply chains. This could be a seismic shift in both practice and policymaking. We will certainly be hearing a lot more about building resilience in the future.
Skills and training are part of this agenda and we are likely to see Sunak announcing more ‘bootcamps’ and work-focused initiatives. A whole host of schemes are also getting closer to the starting line. Remember that of all the plans announced over the past year—lifetime skills guarantees, lifetime loans or any of the new measures in the Skills for Jobs white paper—next to none have actually begun. There will be more funds announced for schools and for ‘lost learning’ and catching up, although any cash might be allocated through gritted teeth to the Department for Education (which the Treasury doesn’t trust very much to spend sensibly).
Damage limitation
Sunak will say rather less about the failures of the past 12 months. Ministers will be hoping to rewrite at least some of this history or that the public will start to forgive or forget it. So not so much on the costs of Test and Trace or the complex and ultimately ineffective (now abandoned) local tier system. Or on his many previous plans for economic recovery or ending furlough (the extension announced this week will be the fifth). Nor should we expect a return of Eat Out to Help Out, which not only cost £500m but also managed to drive sharp increases in Covid-19 infection clusters a week after it began.
Now will be a time for more solemn Instagramming—carrying boxes of vaccines or gazing out over a newly announced Freeport. The newly appointed photographers at Number 10 will need a decent shot of Sunak watching the sun rising on Teesside or over the site of a Treasury campus in Darlington. There will be no serving—or subsidising—a Nando’s sharing platter in nearby Pimlico.
We can expect an underlying theme of damage limitation and longer-term plans for nursing a crippled economy back to health. There may be a signal that the return of normal life also signals the return of normal policy cycles and the confirmation of a three-year spending review in the autumn. For universities and colleges, this will certainly feel more like a time before Covid-19—lobbying for or against Augar and for spending on R&D projects and further education.
Bye to bish bash bosh
Rachel Sylvester, writing in The Times, notes that the tone of politics may be shifting too. Gone are almost all of the “bish bash bosh anarchists” in Number 10, replaced by a more consensual and competent regime. Perhaps we are just one reshuffle away from a similar change in relations with universities? With talk of ‘accelerator zones’ and the Advanced Research and Invention Agency, as well as civil service jobs being moved to Wolverhampton or Darlington, we may be moving into a more thoughtful, collaborative phase of policy thinking.
Prime minister Boris Johnson may still be keen to eat more than one cake, but the prospect of at least one set of grown-up conversations about regional economic development, higher education funding and the practical contribution of universities to economic recovery is well overdue.
We can at least expect a rather less shrill tone from the Treasury and from Sunak. That isn’t their style. Others should perhaps have noted that neither is this really the time for culture wars or campaigns against the ‘woke’. There are much bigger battles to fight, which could really signal a summer and autumn to look forward to. Perhaps, if we read between the lines of the budget, that can be our own ‘irreversible crocus of hope’.
Andrew Westwood is professor of government practice and vice-dean for social responsibility at the University of Manchester.