The silver bullet to save the economy and our public finances

In her Spring Statement this week, Rachel Reeves essentially announced that there’s no money left. The UK faces record borrowing, taxation at a 70-year high, and public spending through the roof – almost 20 per cent up from pre pandemic. 

The UK’s debt is already higher than other comparable economies and borrowing even more money would send our debt repayment bill soaring, which is already higher than the amount we spend on defence, policing and prisons combined. 

And our high tax rates are crowding out the private sector, with recent tax rises proving the celebrated economist, Art Laffer, correct by demonstrating that higher tax rates don’t necessarily equal higher tax revenue.

In short, borrowing is maxed out and tax is already choking growth. If we are to avoid an indefinite doom loop, whereby the Chancellor comes back for her Autumn Budget, cap in hand, once again tinkering with minor spending cuts or tax rises to balance her sums, then we need to think big about how we can reverse Britain’s drift to a high-tax, low-productivity nation. 

The good news is that there is a silver bullet. Not one which is straightforward to fire, but one which will boost economic growth and top up the nation’s finances. The silver bullet can be found in the nearly ten million economically inactive adults in the UK, harnessing their potential and bringing them back into the contributing economy.

Getting people back to work must be nothing less a national mission, bringing together Government, opposition parties, businesses, charities and educational institutions, to deliver a wartime-like effort to “Get Britain Working”, and in doing so, fix our public finances and invest in the UK. We know that business leaders want to give back to society, and at the Jobs Foundation we’ve brought together over a thousand business leaders that want to support this charge. 

We’ve also crafted an Advisory Council of top business leaders to support this, and we’re excited to have four new names join our coalition. Leanne Cahill, CEO of Bravissimo and Chancellor of the University of Sunderland, is a leading example of supporting careers in the retail sector. Tom Kerridge, award winning chef and restaurateur, has created hundreds of jobs in hospitality. Philip Bouverat, former Director of Global External Affairs at JCB Group, has paved the way for collaboration between schools and businesses to improve educational outcomes. And Ibrahim Dogus, Chair of SME4Labour, is at the forefront of making sure that the voice of SMEs – the lifeblood of the economy and generating employment – are represented at the heart of Government.

Research from the Centre for Economic and Business Research has found that getting one million people back to work would have a net fiscal benefit of £40bn to the Exchequer per annum. Two million people back to work – the Government’s target – would bring in an additional £80bn. These are truly transformational sums that would allow the Government to both increase investment in crucial areas like defence and cut taxes, which in turn would further unleash the power of business and spur even more economic growth.

The Government – commendably – has recognised the importance of tackling the issue of worklessness and inactivity. Welfare reform is a politically thorny issue for any Government, and Liz Kendall was brave to face down her backbenchers to make a down payment on delivering reforms that will help get people into work. But we will have to go much further than tweaking benefits to get people back to work.

There are currently only 800,000 job vacancies in the UK, which means that businesses must create an additional 1.2 million jobs for people to fill. But businesses need Government to provide the policy environment that allows them to expand and hire more workers. This means carefully considering the unintended consequences that aspects of the Employment Rights Bill will have on businesses, parts of which will make it more difficult for businesses to create jobs and take on new staff. And it means revisiting how the Apprenticeship Levy operates, to ensure that businesses can access the funds they need to help people from disadvantaged backgrounds into work.

If we can help get two million people back into work, we can both solve Britain’s fiscal conundrum and give people a better life in the process. This is the silver bullet to get the country back on the right track, but we need a national effort to make it happen.

This piece was initially published in the Telegraph. You can view the original piece here.