Baroness Stroud is Chief Executive Officer of the Legatum Institute.
Budgets should be, and always have the potential to be, nation-changing, nation-shaping events. But whether they are or not, they reveal the Government’s understanding of the challenges we face as a country. Get it right and Britain goes from strength to strength. Get it wrong and the people can “smell” political disconnection.
Right now, we stand at a moment of almost unparalleled historic significance. The Brexit vote revealed much about Britain that had been hidden. It represented a heartfelt cry by a people who had not felt listened to. When Theresa May first stood on the steps of Number Ten she clearly demonstrated she understood this. This Budget needs to take that understanding and turn it into action.
The Prime Minister should have two objectives at this budget.
First, she needs to keep her promise.
As she made her speech on the steps of Downing Street, the Legatum Institute and the CSJ were working on a joint project called Healing a Divided Nation. We were analysing why the 48 per cent had voted Remain and the 52 per cent for Brexit. All the data we were seeing told us that social issues such as employment, housing, and education were the top causes for concern and, last July, the Prime Minister articulated what we had discovered when she said: “You have a job but you don’t always have job security. You have your own home, but you worry about paying a mortgage. You can just about manage but you worry about the cost of living and getting your kids into a good school.” Not only did she reveal that she totally understood the concerns of the country, but she made a bold and important promise to be driven not by the interests of the privileged few, but “by yours”.
This budget is the moment where this promise can be fulfilled. Cost of living concerns dominate the lives of those who are just about managing, and one way to address this is to correct the underinvestment in Universal Credit. The money that was put back into tax credits was not correspondingly put back into Universal Credit. A small step to rectify this was taken at the last fiscal event, but a significant underinvestment still remains. This matters because it makes the lives of the people that the Prime Minister has just promised to prioritise – those who are doing everything right – just that bit more vulnerable. And it matters because the impact will be felt just at the point we are leaving the EU, the moment when the greatest protection from any impact needs to be in place.
Having lived through numerous budgets, I can already hear the voices of objection in the Treasury. “How do you propose we reduce the deficit whilst you are proposing we increase investment in Universal Credit?” If you listen to poverty-fighting groups, the debate across the floor of the House, or media commentary, you would be forgiven for thinking that the welfare budget could not be reduced further. However, behind closed doors, there is an emerging left/right consensus about what a 21st welfare state could look like. There are serious savings that could be made only if welfare is de-politicised. I propose a cross-party commission to design a 21st century welfare state that does not use welfare to appeal to specific sectors of the electorate. This would enable the Government to continue on the path of deficit reduction whilst also supporting those on low incomes who are doing the right thing.
Second, she needs to prepare Britain the changing nature of employment, and the other major challenges coming in Britain’s direction
Brexit is obviously the major immediate challenge. Everything that May has been doing to steer Britain through the Brexit process has sent a very clear message that Britain is open for business. The next step will be to clearly signal that Britain is the best place to do business. To this end we should be prepared to significantly reduce the level of corporation tax to ensure that companies not only remain in the UK but also positively choose to come to the UK.
The second challenge though, is the changing nature of employment. The Budget is a moment not just to address the immediate needs of Britain but also to position us for the long-term challenges to the country. We know that one of the biggest challenges of this century will be the changing nature of employment affected by globalisation, the increased use of technology and the advent of artificial intelligence. We know that this huge seismic shift is going to have a dramatic impact on our employment practices, with the World Economic Forum estimating a loss of 5.1 million jobs by 2020. The Budget is a moment to stop and think strategically about the long-term training needs of a nation that will equip us for the skills we need not just for the next five years but for the next 45 years.
Third, she needs a plan to deal with the impact on Britain of the great migrations of our time.
The third challenge we face is the great migrations of our time. We are witnessing people movements across the globe at historic levels, with three key drivers: migration, refugees and human trafficking. The Prime Minister is a world leader on the issue of human trafficking, but we are torn on the issues of migrants and refugees. On the one hand, we want to be an open, welcoming and compassionate nation and, on the other, our communities are struggling to cope with integrating those who have already arrived.
But there are some factors that good policy and a strategic budget can begin to position towards. We have an aid budget that we don’t seem able to spend. We know that the majority of people want to remain close to their homes rather than make a perilous journey, and we know that this situation is not going away anytime soon, with the average length of time someone will be a refugee estimated at 17 years.
We could be investing in the health, education, and employment opportunities of these people, so that they grow up knowing that it is Western values, based on the Judeo-Christian principles that this nation was founded on, that has given them a future. There is a moment, now, to shape a nation: to bring hope to communities and to prepare us to go through two of the biggest global challenges of our generation. I have lived through enough budgets to know that achieving all the proposals I’ve made is unlikely; but, then again, much that is unlikely has happened recently.