On 27th October, the Chancellor published his Budget and, more importantly, his Spending Review for the next three years. There was a lot of money distributed yesterday, although not quite the £150bn that was splashed on all the newspapers (the increase in spending is actually £39bn – as government spending was already due to increase significantly over the Parliament).

Rather than just repeating all the headlines from this morning, this post is going to look at the strategy behind this Budget & Spending Review and what the long term implications are for social enterprises.

Learning from our mistakes

It is a point that has been made by a number of commentators this morning, but nonetheless true, that in essence the Prime Minister and Chancellor have gone back to the New Labour playbook. Even the recreation of ‘Sure Start’ centres (now known as Family Hubs) seemed to hark back to a previous era.

Some might say that going back to the New Labour playbook is no bad thing. But there is a risk that we simply ignore the lessons of the 2000s.

Firstly, despite a significant amount of public spending during the 2000s, many social and environmental problems remained in place. The world in 2010 was not a rosy one. As one political party put it in their 2010 General Election Manifesto: “We will never deal with our debts and build a new economy unless we solve the social problems that cost so much and hold so many people back…[the] big government approach is making our social problems worse, not better – inequality and poverty on the rise; social mobility stalled; family breakdown a fact of life for too many children.” (Hint: it was a blue one). To take just one statistic amongst many, the number of children in low income households was 4m in 2000 and 4m in 2007/08 before the financial crash. Some things got better, certainly, but there were huge challenges that went on being ignored.

Secondly, this model was prefaced on constant levels of economic growth and stability, which are never a given. In the last Labour Budget in 2010, public spending was going to be squeezed. As the then Chancellor Alastair Darling said, “Our plans reduce borrowing by £78bn in cash terms over the next four years. We are set to achieve this goal by a combination of three elements – tax, public spending cuts, and of course, growth in the economy.” Darling outlined £20bn of “cuts and efficiencies” in that budget alone. The point is that even Labour wasn’t planning to sustain New Labour’s spending plans after 2010 because it did not think it was sustainable to do so.  

Finally, we now know that all this was based on an economic model that simply didn’t work. Growth was primarily driven by a huge increase in private household debt (115% increase between 2000-2008) and a dependence on one part of the economy (financial services). Public spending tried to cover up the inadequacies of the model, but in the end, it couldn’t do that indefinitely.

One last throw of the dice?

Given all this you might ask yourself, rightly, why are we doing repeating this strategy all over again if we know it doesn’t work? 

The truth is that the alternative – taking a long hard look at the way that our economy works and who benefits from it – is incredibly challenging. Politically, it means admitting mistakes and challenging vested interests. Economically, most economists and commentators are locked in old models of thinking which take the structure of business and the state as immutable. We have a whole government department dedicated to “business” but in truth government thinks little about how the economy actually works.

The overwhelming feeling from this budget is that it is one last throw of the dice on our conventional economic and social model. The hope is that large increases in spending will encourage business to invest in people and place (it won’t) and address social problems (it may, but only partly).

It also ignores the new factor in our economic and social life. Climate change. Maybe interest will pass once COP departs. But the shifts that are required to tackle the climate emergency are putting new pressures on society and our economy. Between the planet, people and business, something has to give as was discussed recently at the APPG for Social Enterprise meeting.

Opportunities to come?

I think the issue has been nicely summed up by Paul Johnson of the IFS. In his presentation this morning on the Budget and Spending Review he concluded by saying:

“In the end, Mr Sunak has bowed to the demands created by public services which have suffered a decade of cuts, and to the inevitability of increased spending on the NHS. If he is to achieve the ambition he set out at the end of his speech to get taxes down and reduce the size of the state, then he is going to have to come up with some pretty new and radical ways to manage those pressures. He would be helped by an economy growing rather more enthusiastically than it has managed for some time now. Finding the key either to reforming public services to make them cheaper and more efficient or to getting higher economic growth, are challenges which have defeated most of his predecessors.”

“New and radical ways”. Whether you want to improve wellbeing, to tackle climate change or any other priority you can think of, we cannot just copy the policies of the past. Social enterprise is one of a handful of viable alternatives that can deliver results.

Interestingly, the Levelling Up White Paper and spending decisions on this agenda have been held off till the new year. As Levelling Up is one of the most challenging issues facing the government, let’s see if they recognise the need for new and radical ways to deliver it.