A think tank has called for an end to austerity and the creation of an ‘investment state’ to help boost economic growth.
A new report from IPPR has argued that the Government’s policy of cuts to public spending – set to become the longest pause on real terms spending growth on record – has ‘failed’.
They argue that it took demand out of the economy at the moment when firms and individuals were spending less in the wake of the 2008/9 economic crash.
The progressive think tank cites the New Economics Foundation which calculated that the UK’s economy is about £100bn smaller today than it would have been without the cuts.
IPPR, whose report There is an Alternative: ending austerity in the UK was published today, also found that the Government is likely to miss its objective of an overall budget surplus by the middle of next Parliament.
Austerity has also had a detrimental social impact, according to the report.
It cites research showing that many types of crimes have increased, life expectancy has stopped rising and inequalities in health are growing.
Over a million people a year are now using foodbanks, according to the Trussell Trust data IPPR draw on. Rough sleeping has also more than doubled and the number of people living in poverty has risen.
The think tank argues that in order to halt and reverse the impact of austerity, the Government needs to invest in care for the young and old, skills (to address low pay and productivity) and security (to address debt and economic insecurity).
This could be achieve by incrementally increasing the size of the state by 0.7% per year which would see spending rise from around 43% of GDP today to around 48% of GDP by 2030.
IPPR also argues for an increase in corporation, wealth and income tax on high earners which could raise £57bn per year. This windfall could then be reinvested into pubic services.