We need a Budget for jobs and growth, says the TUC
Next week’s Budget must tackle the jobs and growth crisis facing the UK. So said the TUC in our Budget Submission, which has been submitted to the Chancellor, George Osborne, and was published earlier this week.
The TUC’s submission describes the current state of the economy in some detail. Domestic demand (consumer, business and government spending) fell in 2011, contrary to government expectations. Inflation was higher than expected, while wage growth was lower, squeezing household incomes. The consequent fall in economic activity explains flat-lining economic growth. Add to this the fact that over one million more people are now unemployed compared to at the start of the recession and the challenge is there for all to see.
So what should the Chancellor do?
Firstly, and most obviously, he should scrap the austerity programme. The Government has already admitted that it will have to borrow £158bn more than originally forecast, to meet the costs of low growth, so the spending cuts are failing on their own terms. The public sector pay freeze, which is leading to serious falls in income among public servants, should be scrapped. And action should be taken to kick start job creation, especially for young people.
The TUC calls for a job guarantee for every young person who has been unemployed for six months or longer. We also call for a new Youth Credit, for all 16-24 year olds to boost access to training, work placements or progression into better jobs.
There are bold choices that can be made on tax. VAT clearly needs to be cut, as it is the unfairest tax of all, hitting pensioners and the low paid as hard as it does millionaires. A VAT cut would help to boost consumer demand at a stroke. There is an obvious need to try to encourage business investment, so rather than cutting corporation tax, which benefits already highly-profitable sectors, we seek the reversal of cuts in capital allowances and cuts to taxes on wider investment and infrastructure development. We support the credit easing programme, although the amount of money dedicated to this should be doubled to £40 billion and its implementation speeded up.
Recent action from the Department of Business to encourage a modern industrial strategy is very welcome, but any such strategy must have Treasury support. Procurement policy needs to support British industry and a state investment bank must be created, so those strategic technologies that are not in tried-and-tested sectors and are therefore are unattractive to risk-averse high street banks, can get funding. Germany’s KfW, which was able to double access to finance immediately when the economy crashed in 2008, is a powerful example of such a bank. It is nonsensical, given the UK’s potential to become a global leader in green technology, that the Green Investment Bank cannot borrow until 2015, and only then if debt is falling as a proportion of GDP. There must also be a focus on growing those small firms in strategic sectors that can contribute most to jobs and growth.
Finally, a modern industrial strategy must be underpinned by action on skills. In particular, the apprenticeship programme must be strengthened. Apprenticeships must have a minimum three year duration and trainees should have a right to graduate to a level three apprenticeship.
The austerity programme is not working. Action on jobs and growth must be put in its place. There is no better time to start than next Wednesday.