In the recent budget the chancellor acknowledged that too many families are still feeling the squeeze, almost a decade on from the financial crash. Theresa May and Philip Hammond have both promoted the goal of inclusive economic growth or an “economy that delivers for everyone” yet there is no evidence of this.
Despite some welcome focus in the budget on vocational education and linking technical skills to jobs, it is only part of the solution to the all too familiar picture of inequality in Britain today.
Inclusive growth means by definition more people and more places benefit from economic success. Dealing with employment and skills is important, but inclusive growth will also be determined by early years education, health and stability in housing as they have specific impact on the ability to be economically active. There was little in the budget about health inequalities or the imbalance in the housing market, and woefully nothing on the impacts of Brexit.
Meanwhile, continued austerity measures in the shape of a squeeze on benefits and public services means that those on low pay or in insecure employment will continue to struggle. With inflation set to rise whilst pay stagnates more are likely to fall into poverty – currently around 13 million people in the UK, of which 55 per cent are in households in work. And because working-age benefits have been frozen in cash terms the poorest will be hit twice.
So inclusive economic growth is in danger of remaining elusive economic growth for many. Yet the cost of not tackling this is enormous. According to Joseph Rowntree Foundation it’s about £78 billion a year in the UK and it’s not just the costs to the individual in poverty, it’s the costs to the economy and the social fabric of the country.
The thinking on inclusive growth is out there – see for example IPPR North, Joseph Rowntree Foundation and the newly launched RSA Inclusive Growth Commission. And for the first time there’s an All Party Parliamentary Group on Inclusive Growth.
There is renewed interest in the role of the foundational economy but it takes political will for real change. As well as better support and training for low-paid employees there needs to be more emphasis on local procurement to stimulate local economies and stable and affordable tenancies across the social and private rented sector. As a matter of urgency, remove the freeze on working age benefits so their value keeps pace with rising prices and provide more tailor-made local support for those out of work.
It also takes fresh thinking. Business decisions made to satiate the increasing demands of shareholders at the expense of longer-term needs of the business are in fact poor business decisions. Unless we break shareholders expectations of quick (and huge) returns we won’t get the investment that is so needed for innovation, research and for new opportunities – the instruments for real sustained growth. Rampant greed of this sort has little societal value.
We must start to think and act differently. We are trying to encourage this in Sheffield through our work on the Our Fair City campaign because we know that if our economy continues to operate in the way it has done we will get the same results – more children in poverty, greater regional disparities, growing inequality.
Old orthodoxies need to be challenged – slashing taxes does not boost investment. The state needs to be recognised for what it is – a provider of services that actually underpins the private sector and a wealth creator in its own right. Finally we must accept that growth comes at a cost. We have to recognise our planetary limits and measure success not by the number of rich but by the absence of people in poverty.