Spend to Save Britain: A Common Sense Approach to the 2024 Budget

The Chancellor of the Exchequer, Rachel Reeves, has described the UK economy as being in its worst state since the aftermath of WWII. But the Government’s new fiscal rules mean that it has shied away from a Beveridge-style public investment package that made Attlee’s administration from 1945 so successful. The change to the definition of debt announced at the Budget has freed up some space for borrowing for investment in infrastructure, though not enough to make up for the harm caused by cuts in the last 15 years. On the other hand, the announced ‘stability rule’ and a 2% productivity, efficiency and savings target mean that an austerity agenda that has clearly failed over the last 15 years will continue for current spending in most government departments.
Decades of reduced public spending in combination with a halving in the rate of corporation tax compared to the early 1980s and a slashing in taxes on income from passive wealth, have coincided with increased individual and regional inequality, low growth, productivity, wages and the tax base they drive. Since the Global Financial Crisis, wages have shrunk in real terms for the majority but wealth for the minority has grown. This continues a long-term trend towards reduced remuneration for work and increased returns on unearned income. The evidence base on which the austerity agenda and trickle-down economics were based has been thoroughly debunked, both academically and by the UK’s economic performance since it was instituted.

Instead, we need to invest in Britain to rebuild the nation, and we show that it provides such large returns through productivity multipliers (£2.74 for the economy for every £1 of public funding invested) and savings to the public purse that it makes no economic sense to pursue cuts. To support that initial investment, and in contrast to the Government’s political gymnastics in targeting complex and obscure mechanisms to meet ill-judged manifesto commitments, we also show that straightforward, fair and effective taxation on passive wealth, carbon production, luxury consumption and corporate profit is feasible, affordable and popular In addition to this macro analysis, this report uses complex, cutting-edge microsimulation modelling to show the impacts of these reforms on our everyday experience, providing an overwhelming economic argument for the policies we set out above. We underpin all of this with a set of comprehensive and sustainable economic rules that would secure the nation and the wellbeing of its people.
We assess public opinion on the tax programme from a January 2024 survey of 2200 voters. We find that our Common Sense Approach has an average approval rating of 73/100 nationally, and 60/100 among 2019 Red Wall Conservative voters. There are clear associations between risk of destitution and various other socioeconomic characteristics, health status and levels of support. The very small number of policy ‘haters’ can be persuaded with the right narrative. In sum, the public are far ahead of the politicians.

The Government has made some progress by redefining debt, but it must go much further with both infrastructure investment and ‘current spending investment’ that would save the public purse enormously downstream. It must also institute institutional reform to support this approach. As in the post-WWII period, the productivity and growth this creates is the only way to secure a decade of national renewal and bring down debt.