Revealed: 750,000 viable jobs unnecessarily at risk from combined failures of Sunak’s budget, finds IPPR
5 Mar 2021 10:20 AM
IPPR analysis finds chancellor’s stimulus is half of that needed to prevent a major surge in unemployment
The combined effect of the budget will be to leave 750,000 otherwise viable jobs unnecessarily at risk by this time next year, according to new IPPR analysis.
The chancellor’s failure to stimulate the economy sufficiently means it will not return to full capacity as quickly as it could, and leaves it significantly weakened for years to come. A stronger stimulus would have prevented this, by delivering higher public investment, strengthening public services and providing targeted transfers for families hardest hit by the pandemic.
Combined with his decision to have no follow-up work support scheme following the end of furlough in September, this could mean unemployment rising to 2.7 million (8.5 per cent) a year from now.
That compares to 6.1 per cent if the chancellor had pursued a bolder stimulus, comparable in ambition to that planned by the new US administration, according to IPPR projections. The difference is equivalent to 750,000 jobs. Unemployment now stands at 1.7 million (5.1 per cent).
In his budget Rishi Sunak should have “boosted it like Biden” to secure a strong and sustainable recovery, according to IPPR. The chancellor’s total planned stimulus after the budget is only half of the £190 billion IPPR estimates is needed for the economy to bounce back quickly, in a fair and sustainable way.
Public investment after the budget will remain below 3 per cent of GDP, while it could have been raised to 5 per cent - which would have created jobs and helped reach the UK's climate targets.
In its new analysis of the budget, IPPR demonstrates that the Chancellor’s total spending plans for 2021/22 amount to only 4.4 per cent of GDP, whereas the Biden administration’s stimulus plans are closer to 9 per cent of GDP.
Earlier this month, IPPR estimated that a stimulus of £190 billion (8.6 per cent) was needed for a strong recovery that secures jobs, investment and public services.
Dr George Dibb, head of the IPPR Centre for Economic Justice, said:
“The chancellor had an opportunity to boost it like Biden, using bold public investment to drive a bounce-back from the Covid-19 crisis. What he actually set out is not enough to restore the UK economy to pre-pandemic levels and puts 750,000 jobs unnecessarily at risk.
“We welcome Rishi Sunak’s announcements of extensions to business support, but we don’t just want businesses to survive, we want them to thrive if we are to grow our way out of this crisis.”
Carsten Jung, IPPR senior economist, said:
“There are serious risks around the chancellor’s support package. With only half the ambition of Joe Biden, Sunak has bet on a recovery largely driven by higher income households spending their accumulated savings. But two in five households are worse off than before, and the same share of small businesses is at risk. We will not see a burgeoning bounce back without a further fiscal boost.
“The chancellor also did too little to invest in future growth. The Treasury contends there will be significant long-term damage to the economy, but the budget does not address this. Higher public investment could have driven a clean recovery and boosted the care economy, creating future-proof jobs. Rishi Sunak needs to step up and act bigger and bolder to achieve both a strong recovery and sound public finances.”
Dr George Dibb, Carsten Jung and Shreya Nanda, IPPR economist, are available for interview
NOTES TO EDITORS
Last month the IPPR Centre for Economic Justice called for the chancellor to ‘boost it like Biden’ with a £190 billion UK recovery stimulus for 2021/22. The research, by Dr George Dibb, Carsten Jung and Dr Parth Patel, is available here: https://www.ippr.org/research/publications/boost-it-like-biden
The estimate of jobs at risk constitutes the difference between those at risk under that IPPR stimulus scenario, set out in Boost it like Biden, and the stimulus scenario announced in the budget. It follows the methodology for jobs at risk outlined in Rescue and Recovery (at https://www.ippr.org/research/publications/rescue-and-recovery) and updated in Boost it like Biden. It models the relationship between the output gap and the impact on the labour market and extrapolates it forward, based on the two scenarios.
The Centre for Economic Justice also published research last month revealing that 600,000 firms and 9 million jobs are at risk without further support. The analysis by Dr George Dibb and Carsten Jung is available here: https://www.ippr.org/blog/employers-at-risk-of-bankruptcy-without-further-support
The landmark 2018 IPPR Commission on Economic Justice established a blueprint for a fairer and stronger economy. Among its 72 recommendations were a number of tax reforms including a rise in corporation tax. The final report of the commission is available here: https://www.ippr.org/research/publications/prosperity-and-justice
IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence. www.ippr.org