The Myth of the Tories’ Bold Economic Policies

FDR's New Deal amounted to 40% of GDP in the 1930s, Rishi Sunak's adds up to 0.2% of UK GDP today. His government's much-lauded economic 'radicalism' is little more than a propaganda exercise.

Last month, a YouGov poll showed a mere 6 percent of the UK public want a return to pre-pandemic economy, indicating rising consensus among the British public for change. Yet the Chancellor’s summer statement failed to recognise this, choosing instead to double down on elements of business-as-usual that insulate and reinforce the power of those already amassing wealth.

This could and should have been a moment to pause and reassess the current path, reimagining a reconstructed economy: a new social contract rooted in a value system that breaks with business as usual. The economic climate was right, too, with historically low borrowing costs creating an ideal environment for substantial investment.

Instead, we were handed a patchwork of substandard investments following a so-called New Deal worth £5 billion, amounting to a mere 0.2 percent of UK’s 2019 GDP – a far cry from the 40 percent witnessed in the 1930s under Franklin D Roosevelt. This ‘New Deal’, packaged as a means of reinvigorating an economy decimated by a deadly pandemic, was worth a mere £1 billion more than the Palace of Westminster refurbishment.

The level of the investment offered is clearly insufficient for the scale of this emergency. The economic fallout from the pandemic has triggered a lasting and profound crisis, giving way to the deepest recession in three centuries and the bleak prospect of mass unemployment, as tenants struggle to pay rent and a crisis in care mounts.

Spending alone, however, will not suffice. While the virus may not discriminate, the way we design and organise our economy – how it operates and, in whose interests – does. The investment should have then been accompanied by a raft of policy reforms – restructuring our labour market for high paid, secure, green jobs; repealing the austerity legislation to protect our social security system; and forging a new path for pluralistic business models to retain and grow community wealth.

If the billions used to bail out the banks in the aftermath of the last financial crisis have taught us anything, it is that state intervention can be used to further concentrate wealth in the hands of a few. Rather than reflecting on this devastating crisis – and the injustices and inequalities it has exposed – many of the proposals set out by the Chancellor are grounded in a desire to bolster the very ‘normality’ the overwhelming majority of the population do not want to return to. 

While the focus on jobs in Rishi Sunak’s speech is welcome, the devil is in the detail. The Chancellor announced a ‘kick-starter’ programme for young people, whereby the government will cover the cost of 25 hours’ work a week at the National Minimum Wage, meaning £4.55 for under 18s, £6.45 for 18 to 20-year-olds, and £8.20 for 21 to 24-year-olds. The real Living Wage, calculated on what people need to live, is £9.30 – around half of what under 18s are being asked to live on. While employers can top up government subsidised wages, there is no guarantee they will, meaning that some young people may be left earning a government-subsidised poverty wage. 

As well as the precarity felt by workers in insecure employment, tenants have suffered during this crisis, with one in eight private renters falling behind with housing costs since the pandemic broke out, despite the fact landlords are not required to suspend rents, leaving the financial sustainability of many dependant on compassion in unequal power relationship. Instead of addressing the housing crisis at its source, the Chancellor announced there will be no stamp duty to pay on property purchases up to £500,000, a decision that even extends to some buy-to-let landlords.

Kickstarting a housing market that is fundamentally imbalanced and unattainable for many is a missed opportunity to see housing reform as a means of tackling broader social malaise, from rolling out a national retrofitting programme to combat climate change to supporting low income households, eradicating fuel poverty, strengthening building regulations to ensure safe homes, and providing meaningful investment in social and affordable homes.

The problem with the speech was not just what was included in it, but what it was missing. While Covid-19 rightly remains the current focus, the single biggest threat facing our future is climate breakdown. It is abundantly clear that now is the time to tackle the intertwined crises of economic and climate injustice.

Amid lockdown, daily emissions fell by 17 percent when compared to the daily average in 2019. Staggeringly, this drop only takes us to 2006 levels. Taking the scale of this into account, small adjustments at the margins of an economic model driving collapse won’t be enough to secure a liveable planet and future for all.

Either we can wait until it is too late, or we can invest and re-orientate our economy away from short term growth for some, and towards a planned economic transition to ensure the winding down of fossil fuel production is accompanied with the creation of high-paid, high-skilled green jobs: A green recovery that is hardwired into legal structures and extends to every aspect of our economy is common sense in a time of climate breakdown.

To achieve this, we must reimagine our economic and political institutions, seizing the short time we have left to build a new model that is democratic, equitable, and sustainable by design.