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Spend, spend, spend is not enough

Some thoughts on the Chancellor's measures for recovery.


Ray Noble, academic and writer


The Chancellor's measures are a big package, but likely to be not big enough. There is much to be welcomed, even if it is a commitment with some half-measures. The government should not allow political philosophy to get in the way of doing what is required. Now more than ever, we need a unity of purpose across the political divide. That is never easy. We did it once before in what became known as the 'post-war consensus' on the need for spending on social infrastructure.

It helped us recover from the ravages and debt of war. Far from increasing national debt, the social investment-led recovery helped stimulate demand and the national debt tumbled. All the main parties, Tory, Labour and Liberal put employment at the heart of the strategy.

Merely urging people to spend is not the answer. In the long term, we need an investment-led recovery. Investment creates jobs, increases earnings and thus spending people can afford. If we sit back and allow unemployment to increase, spending and tax revenues will fall, the cost of welfare will rise, and we enter a vicious circle of debt. Unemployment also means a loss of skills, which makes recovery more difficult.

Of course, it is natural to think that encouraging people to spend will be a major part of recovery. After all, businesses are suffering because spending has fallen. But that is only part of the problem. Even if we spend on the high-street at pre lockdown levels, it will not be enough to save the jobs of those businesses now about to lay off workers. You can't spend in an empty, vacated John Lewis's.

As the IFS says " this is no normal recession. It’s the deepest in history." But it could be seized as an opportunity to reshape our economy, stimulating local production, reducing our reliance on global food supplies; an opportunity to invest in Britain and rebuilding our community infrastructure. It needs social as well as an economic investment.

The IFS also rightly point out that timing matters. Merely throwing money at it in one big heave isn't what is required. Sector by sector businesses will struggle, and the underlying problems will be different and need addressing. We have yet to learn precisely which businesses are in trouble and likely to fold. Not all would have had the same resilience. This requires a flexible response from the government. It needs a strategy, involving businesses and unions. £30 billion is unlikely to be enough.

If you have read this far, then that is good. By all means, comment on this, but do try not to dig deeper into your political trenches. I don't know all the answers. I'm just trying to make some sense of the road ahead. Yah boo isn't going to work.

                                                    Ray Noble sings Nadau ta Baptista
 

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