Briefing Note: A Spending Review for a Green and Care-led Recovery

Background

This Briefing Note lays out the arguments for higher borrowing to tackle urgent spending priorities, and analyses how this investment could be spent to achieve the greatest impacts, including a detailed proposal for a Green Spending Package.

Investment in the UK economy is lower than in most other advanced economies, and has been for two decades. This Briefing Note from the Economic Change Unit makes the case for greater public and private investment in the UK economy, and for targeting this investment at the three major challenges we face:

1. the climate crisis;
2. the care crisis; and
3. levelling up.

In its latest forecast for the UK, the IMF calculates that the economy is about 5% below its pre-pandemic growth path. This Briefing Note argues that around half of that is due to lack of demand and investment certainty, and can be unlocked through a fiscal stimulus of £70-90bn per year in this Spending Review period. This corresponds to about 3-4% of UK GDP; the Biden Administration’s stimulus plan, by contrast, equates to about 9% of US GDP.

With interest rates historically very low (and likely to remain so even if the Bank of England increases them as expected over the next few months), and nearly 40% of government debt owned by the Bank of England, the UK economy has considerable headroom for further borrowing.

“The Chancellor’s rhetoric of ‘fixing the public finances’ is misleading, and returning to tight public spending to achieve it would be a grave economic mistake. Following a decade of austerity and the pandemic the economy needs investment, and it can well afford to borrow for it.”

This Briefing Note lays out the arguments for higher borrowing to tackle urgent spending priorities, and analyses how this investment could be spent to achieve the greatest impacts, including a detailed proposal for a Green Spending Package.

View and download the full briefing here

The Economic Change Unit is a non-profit organisation that supports the efforts of those seeking to build fairer, more sustainable and more resilient economies. The Women’s Budget Group, along with other progressive economics think tanks, is affiliated with the ECU and produced the costings for the social infrastructure section in this Briefing Note.