Demos responds to the Budget

Social Policy

Social Care
Today’s funding injection into social care is a welcome investment to a critically deprived sector, heaving under the weight of a rapidly ageing population. This will hopefully create some breathing room to ensure that the much bigger issue of fundamental sectoral reform can take place; after all, while increasing funding will be crucial to addressing the current crisis, we need to think beyond ‘stop-gap’ measures and look to build a more sustainable model to meet our future needs. This Government has been pushed to the cliff-edge on this issue, and they have rightly met the challenge through some significant funding investment, but the big question now is whether they will have to political courage to tackle the hugely difficult trade-offs that lie ahead. There are plenty of creative and innovative solutions that could make a difference in delivering better, more efficient care – but the Government will be unable to avoid the need to also help the British public to understanding that they will simply, in one form or another, need to pay more for their care.

Skills

Building on the Sainsbury Panel report, the Government’s Skills Plan and Industrial Strategy have set out a clear and relatively comprehensive agenda on skills. With adult skills funding down 41 per cent in real terms since 2010, the announcements of £500m-a-year in funding investment and £170m for new Institutes of Technology, alongside the new T-levels qualification standards and the planned rise in training and contact time, represent a hugely welcome realignment. It is also encouraging to see that the Government appreciates the hard work still to be done to improve the status of technical education – as our Commission on Apprenticeships demonstrated, a tremendous gulf remains in public attitudes towards non-tertiary education. But while the Government has shown its commitment to the supply-side of the UK’s skills system, the wider economic implications of Brexit, and a persistent disconnect between training and business needs, continue to cast a shadow over the demand-side of the equation.

Education

The Government’s decision to focus its education investment on free schooling, with an option for these to become selective, is undoubtedly controversial and will not find many evangelists in the sector. While broadening social mobility pathways is critical, it cannot be ignored that the Budget failed to set out any clear plans to address the £3 billion funding gap in mainstream schooling, identified by the National Audit Office over the course of this Parliament. Many schools and teachers around the country remain stretched to breaking point, and it is critical that we ensure that resourcing issues are addressed – so that children can not only receive top quality academic education, but also gain the life skills and extra-curricular learning that our research has demonstrated is so important in levelling the playing field for those in socio-economic disadvantage.

To this end, we are pleased to see that the Government’s continued commitment to channelling the sugar tax revenue into school sports and healthy living programmes. This is a vital area of investment, given the proven relationship between mental and physical health and educational outcomes, and in laying the foundations for active lives. That said, the Government needs to be clear about its approach to public health, having gone quiet on many of the other deals it has struck with industry, such as on fizzy drinks or alcohol.

Childcare

We greatly welcome the Government’s announcements on free childcare provision, as a means to reducing some of the tremendous barriers that formal childcare poses to particularly women’s economic participation. However, providers have repeatedly warned that the funding on offer for the free entitlement is not enough to cover basic costs, so a risk remains that corners could be cut on staffing, or parents could be asked to ‘top up’ entitlements to ensure good quality care. Demos has long argued that the Government should be exploring the right ‘mix’ of childcare, also looking at the contribution of informal care and other measures that support better work-family balances.

Returnships

On International Women’s Day, the announcement of an additional £5m for return-to-work schemes, predominantly targeted at women returning from maternity breaks, is a welcome intervention. With the gender pay gap only significantly widening once women begin to leave the labour market to have children, policies targeted at softening its financial impact are vital to reducing structural inequalities in earnings between genders.

Returnships and reskilling programmes will be an increasingly important aspect of addressing the productivity puzzle in years coming forward – not only for women’s economic participation, but also for ensuring that older people, carers and those who have come back to work after long-term illnesses, can all be actively involved in the labour market. With huge upheavals to the structure of our economy and the nature of work lying ahead, we must also think boldly at reskilling and lifelong learning as an opportunity to unlock talent and ensure smoother transitions for individuals and their communities during times of industrial change.

Economic Policy

This was a carefully managed Budget with a few big-hitting announcements and very few of the bells and whistles that had become customary in the pre-May era. In the context of a time of significant political and economic upheaval, it may very well also be remembered for what wasn’t said – particularly Brexit, which loomed uneasily as the elephant in the room after the previous evening’s Lords defeat.

The announcements on tax reform and devolution set the stage for what will likely be a major rethink of the Government’s role in supporting the business environment and also in delivering social services. Importantly, the Government appears to recognise the importance of digital technologies in underpinning growth and social equality. As we have previously highlighted, broadband provision is tremendously uneven across the country, impacting both households and small business performance – vital to local economic growth. Investment in R&D and infrastructure, particularly outside of the South-East of England, is also encouraging; however, the Government’s plans for spending are still far below the levels recommended by the OECD, and remain lower than any of our major economic competitors. A more sustainable, dynamic post-Brexit economy will require further, more ambitious thinking in this area.

The Chancellor is right to support businesses hit hard by the revaluation of business rates, with £435 million extra relief pledged, however it appears to be only a time-buying exercise, with businesses such as pubs facing a cliff edge in a year’s time. In our 2016 report Invest, Devolve, Liberate, we argued business rates were becoming an intolerable burden for many small businesses, taking on an ever-larger bill while bigger firms who use less property benefit from cuts the continued cuts to corporation tax. It is encouraging to see the Government evolving its thinking towards the realities of a digital economy, by looking to reform the rates system to include the increasing number of companies who conduct business online.

It is correct that the Government carefully considers self-employment, now representing 15% of all workers, however the announcements today do not strike the right balance. The impetus to align certain aspects of taxation is understandable, however it is problematic for the National Insurance contributions of the self-employed to match those of employees, while they continue to lack many of the basic rights employees enjoy – including statutory sick pay, and paid parental leave. The Government must look at how contributions can be balanced with also providing more security for the self-employed, particularly those in more vulnerable occupations. We know that they are typically paid much less than employees – £240 per week, compared with £400 for the average worker – and that their incomes have fallen over the last 10 years. The Government would be best advised to wait for the conclusions of the Taylor review, which will provide the right opportunity to reconsider the full spectrum rights and obligations surrounding self-employed workers.

 
If you would like to speak to our Chief Executive, Claudia Wood, or one of our social or economic researchers about our analysis of the Budget, please contact Alex Porter.