Since 2010/11, successive UK governments have chosen to impose a programme of austerity in an attempt to reduce the budget deficit. This period of austerity is set to be the longest pause in real terms spending growth on record.
However, there is a growing consensus that austerity has failed economically, fiscally and socially. Instead, as a society, we must use this moment to create a more fundamental shift away from the ‘consolidation state’ towards an ‘investment state’. To do this, the state must have a bigger role – and must invest more – in four ‘social deficits’.
- Care, focused on the young and the old.
- Skills, addressing low pay and productivity.
- Health, in particular inequalities and rising mental ill-health.
- Security, to end poverty, growing levels of debt and economic insecurity.
We argue that to achieve this, policy makers will have to make two key shifts in policy.
People on middle incomes will have to feel that those on higher incomes are paying their fair share of taxation before they are willing to pay more themselves. We therefore call for increases in corporation, wealth and income tax on high earners – together raising as much as £57 billion in revenues per year – in the short run.
Everybody – including those on middle and higher incomes – will need to benefit from high quality public services in order to create a coalition in favour of the ‘investment state’. This will require a shift towards more universalist public services and welfare provision. We therefore call for the additional funding raised in the short term to be invested in universal childcare, social care and mental health provision – as well as reversing cuts to universal credit, adult education and public health.