The problems facing Britain now are often compared with those of fifty years ago. As in the 1970s, our time is affected by economic uncertainty, here and abroad.
Now as then, faith has been lost in the prevailing dominant economic model. In the 1970s rising inflation, industrial strife and ‘stop go’ economic cycles led many to question Keynesian economic thinking. Later, the Blairite model of welfare capitalism, encompassing the empty promise of globalisation, lost all credibility with the financial crisis of 2008.
It is time for an entirely different approach to economic policy; for economic strategy must support a society that works for all.
There is a long way to go to achieve this goal. Nevertheless, last week’s Budget saw the Chancellor announce a number of key tax cuts which will save families across my constituency hundreds of pounds each year in National Insurance contributions and reduce tax on child benefits for many. Since November, the four pence in the pound cut from NI will save the average taxpayer £900 each year. This tax cut means 27 million people will keep more of their own money to spend how they choose.
Reforming the Child Benefit payments system is a welcome step in encouraging couples to start families. Marriage matters too because it provides much needed social stability. Among high income couples, 83% are married; among low-income parents it is only 55%. All the evidence demonstrates that married parents are much more likely to stay together. The tax regime should do more still to support families.
Which is why I welcome the additional step taken by the Government to boost hard-working families is the announcement that a consultation will launch in due course to examine whether to change Child Benefit eligibility to being based on household income, rather than on individual income, by April 2026.
Yet macro-economic problems prevail. Not least among them is the decline in the workforce as a consequence of Covid. Following the pandemic, there were 419,000 more men and women who were economically inactive from January to March 2022 than there were during the same months in 2020. These are people who were previously working but have now ceased to do so, while others here never work. All in all, an incredible 5.2 million are claiming some form of out-of-work benefits.
In some cities – such as Glasgow, Liverpool and Manchester – a fifth of all working people are claiming out-of-work benefits. The inevitable result has been the breakdown of families, and hollowed-out communities.
Too often Britons compete with foreigners for jobs as mass migration displaces investment in domestic training and skills. Simultaneously, too much immigration also displaces the modernisation of working practices, so damaging productivity.
Our age, as W.H. Auden might have put it, is an age of anxiety – ingrained uncertainty prevents too many people from coming close to reaching their potential, or even thinking beyond their day-to-day existence. The measures in the Budget must be the start of a change to help us craft a confident new age which incentivises and rewards social responsibility and hard work.
The economy must work for everyone, not just for a handful of people at the top. This budget for working families was a welcome start, but much more is required to frame and form a fraternal economic order that rewards hard work and reinforces our reciprocal, communal obligations. We should aim for no less than an economy that spawns social renewal.
