For a Budget with so many measures known days in advance, one of the biggest surprises came not from the Chancellor, but from the Office for Budget Responsibility’s forecast. Economic growth will stay anaemic, not exceeding 2 per cent in any of the next five years.
There is no doubt that the Chancellor inherited an economy on life-support, after the previous Conservative government crashed the public finances, left our international trading relationships to decline and failed to put forward any kind of long-term economic vision.
But with a Budget heralding significant increases in public investment and a supposed “end to short-termism”, it is fair to say that everyone could have expected better growth prospects. So what more could the Chancellor have done to fuel growth?
First, she could have looked to put our health and care services back on their feet. Roughly 2.8 million people who may otherwise want to work aren’t able to do so because they are battling a long-term health condition. And millions more are stuck on hospital waiting lists, unable to access the treatment they need. For our economy to grow, this has to change, and that requires strategic investments.
Of course, the Budget did contain significant funding for the NHS, but will it be targeted where it matters most: primary and social care? Investing in public health and expanding early access to GPs, pharmacists and dentists means fewer people going to hospital in the first place. And people’s productivity at work plummets when they’re left to pick up the pieces of a broken social care system. For all the welcome funding announced for the NHS, we’re yet to see how it will be spent, and the lack of urgency on social care is hugely worrying.
Secondly, the Chancellor could have looked to small and medium-sized businesses as an engine of growth – a means of support rather than just more tax revenue. SMEs have suffered a bruising few years, punctuated by an energy crisis, a pandemic, staff shortages, rising interest rates and political uncertainty. The changes to employer’s National Insurance – an increase in the rate and a lowering of the threshold – could be the straw that breaks the camel’s back. For all of the Chancellor’s assurances that the very smallest firms will be shielded, nearly a million businesses will pay thousands more in tax, including many SMEs.
Equally disappointing was the lack of any meaningful progress on the business rates system which badly penalises our high streets and town centres. Liberal Democrats have spent years advocating for a fair alternative, based on the land value where commercial properties are located. An end to the many absurdities of the current system would free our businesses to do what they do best: invest, create jobs and power our economy forward.
The Budget could have done more to create new jobs, too. Our economy needs a serious plan to upskill and invest in high-growth sectors, from renewable energy to digital and bioscience. In a learning economy, investing in people is a safe bet. The Chancellor could have also announced a review of the flawed apprenticeship levy, making it a broader, more flexible skills and training levy, and committed to green technologies being at the heart of her investment efforts.
The Chancellor should have looked for answers to economic growth that lie beyond our borders: beginning to fix our broken relationship with Europe. Reams of red tape and countless trade barriers erected by the Conservatives are costing the UK investment, jobs and tax revenue. The OBR estimates a 15 per cent hit to the trade intensity of our economy. Tearing down these obstacles and rebuilding trade with our closest partners would provide a massive boost for British jobs and business, and could have given the Chancellor not just a better growth forecast, but more revenue for our public services too.
The result of the US election makes this change even more urgent. Donald Trump’s presidency could unleash new economic headwinds, making closer trade and cooperation with Europe an even bigger priority.
From the shameful legacy of the Conservative Party to an increasingly challenging international environment, our economy continues to face major challenges. But with strategic investments and key policy corrections, our country has a genuine opportunity to mark a clean break with the failures of the past few years.
What we Liberal Democrats want to see is a plan for growth that invests in people, in small businesses, in the green jobs of the future and in fixing our trading relationships.
Through these measures, we can build an economy that is prosperous and fair – and growing again.
This article first appeared in our print Spotlight Party Politics Special, published on 15 November 2024.
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