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19.03.20

IED: The budget should be "ripped up" in light of Covid-19

“I think the budget should be ripped up; I think that budget is now a piece of fiction.”

The Executive Director of the Institute of Economic Development (IED), Nigel Wilcox has written a report outlining the immediate, medium and long-term responses to the Covid-19 pandemic felt across the UK.

PSE’s Emily Rodgers spoke to Nigel about the effect this is all having on the public sector and how they might be able to put things into place to weather the storm.

Whilst this week has brought the end of some businesses, such as Laura Ashley, it is key to consider what was already going on in the economy prior to the outbreak.

Nigel outlined that what the crisis could mean is the hastening of the inevitable, meaning certain sectors which may have taken a while to deteriorate, such as the traditional high street, might take two to five years instead of five to ten.

That being said, other industries, such as the ecommerce industry, video conferencing, software etc are seeing their rise period happen sooner than expected.

It comes back to this idea of ‘The new normal’, mentioned in the IED’s response, which will beg questions like ‘Do we need to travel all this way for a face to face meeting?’, ‘Can this be done online?’ ‘Can we work from home?’

“Multiple time zones, such as the US have been doing this for years, but we’ve always thought jumping on a train for an hour or so is no problem. Then you start to think about all the things that can be delivered.”

He went on to say how this might affect the volume of ‘fixed costs’ that everybody bares, and if people might reassess.

“People think crises are a one off, but I can think of three that have had a major effect on the economy already, though not as serious, they have brought our country to standstill. These things keep happening, therefore the amount that people want to take on fixed cost will re-evaluate, things like spending £40,000 on a car or sinking all that money into housing. People might re-evaluate this a little.”

The flexibility of the UK workforce was increased as a response to the crisis in 2010, with measures such as the zero-hour contracts, but Nigel believes this only benefits business owners.

“When you’re faced with this crisis ten years down the line, it’s an absolutely disastrous outcome for the people that the business model changed for, the self-employed and those on zero hours.”

From a public sector perspective, the issue goes beyond simply financial, as year on year cuts to services have meant that there isn’t the manpower to deal with things that arise in times of crisis, such as applications for grants, and sadly the number of fraudulent claims made.

“The institute has been saying this for months but the government has got to wake up to the fact that - any time there’s any sort of crisis in terms of local government - to put something in place locally, because nationally they can’t. It’s the very part of government that has been savagely affected by year on year cuts and we keep expecting them to help and they can’t.”

“Money is not the issue right now – ten years of laying staff off means you can’t turn the tap on and off as there are no people. We could double their budget but it wouldn’t make any difference in the next three months because they simply wouldn’t be able to react quick enough without the staff.”

Just over a week on from the new government’s budget delivery, in a year that was supposed to bring stability to a somewhat fragmented country following Brexit uncertainty, Covid-19 could kybosh it all.

“We need a new budget when this is over and we know what the new parameters are and again that’s not criticism it’s just common sense.”

Talking about the budget and the local schemes announced around green infrastructure Nigel felt it wasn’t the devolution that local authorities were hoping for. “Whilst I saw the money being spread around the regions, it did seem to be government deciding where and when and that’s just more of the same, we have had that.”

Nigel finished the conversation with his fears for the future of the UK and how he believes, the solution lies with local government.

“That ability to react locally with good quality services that people can rely on, trust and maintain some level of order are massively important.”

The full response from the IED will be published in the upcoming issue of PSE magazine.

 

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