The impacts of this pandemic will continue to be felt long after vaccines have generated enough Covid-19 immunity to eliminate its immediate threat to human health. There are the tens of thousands of lives that have been ended decades too soon, leaving gaps that will never be filled in the hearts of loved ones and, last week, the scale of the long-term economic damage that this virus will wreak was set out by the independent Office for Budget Responsibility. Not only is the economy forecast to experience an 11.3% contraction this year, the biggest in more than three centuries , but the pandemic will leave the economy 3% smaller in the long run. It may not sound like much but, without significant redistribution, the job losses and pay cuts will leave countless families in dire financial straits.
This is the backdrop against which the chancellor’s spending review must be assessed. The right question to ask of Rishi Sunak’s announcements is whether he is directing enough resources at economic recovery, in the context of one of the deepest recessions this country has ever known. At a time when the cost of borrowing is so low, Sunak should be throwing everything at getting the economy moving again and protecting the least affluent families and regions from Covid-19’s worst impacts. A failure to do so will not only prolong the crisis, it will trigger intergenerational cycles of hardship across areas of the country that will take decades to recover from.
Sunak has failed two important tests.
First, he has failed to do enough to protect the least affluent. His Conservative predecessors imposed huge cuts to tax credits and benefits for low-income, working families with children over the past decade, leaving many of them thousands of pounds worse off. They told us this was an economic necessity but, in reality, it was a political choice, with the proceeds used to fund billions of pounds of tax cuts a year that disproportionately benefited the affluent, a straight transfer from the most hard-up to the better-off.
The chancellor should have reversed these cuts as a matter of urgency when Covid-19 hit. Instead, he introduced a £20-a-week universal credit top-up that is nowhere near enough to make up for the cuts of the past 10 years and remains set to be removed next April. This would leave more than 6m families more than £1,000 a year worse off at a time when they face higher costs as a result of the pandemic. And it will mean the 2.6 million people who are forecast to be unemployed by the middle of next year will find themselves on unemployment benefits that are at their lowest real levels since 1990. Moreover, a growing number of families will find themselves homeless as a result of the government’s decision to freeze the level of support they can get with their housing costs. It is callous in the extreme.
Sunak’s second failing is in not taking the right long-term decisions needed to protect the economy. In the 1980s recession, too…
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