Long-term problems such as poor productivity and public services make the case for an expansionary budget
signals rising from Downing Street suggest that the budget due on March 11th will be dull. The covid-19 virus has clouded the outlook; the new chancellor, Rishi Sunak, needs to get his feet under the desk; there will be more fiscal announcements later in the year. It sounds as though the government plans to treat the budget as a holding operation. That would be a mistake. A new government’s first budget is a big moment, and this government has a lot to do. It is time to be bold, not boring.
These last two factors would argue for an expansionary budget. But there is a further reason: while the government managed immediate perils, long-term problems—notably poor productivity and public services, particularly outside the south-east—have gone unattended. The second area that deserves more cash is public services. Local authorities, which provide many of them, have about a third less to spend, in real terms, than they did in 2010, and the government’s current plans imply further cuts. That is poor politics and poor economics.
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