'We must make different choices now'

Our economy is broken. Our public services are in crisis, from the NHS to the dozens of local councils facing bankruptcy. Our industries are in crisis, as infrastructure collapses from transport, to water, to the electricity grid. From Port Talbot to Aberdeen, tens of thousands of workers face job cuts from an unjust “transition to “net zero”.

And, as the Prime Minister, Keir Starmer, has noticed, behind this economic failure looms an even bigger societal black hole. Last month’s riots were a warning sign. If you kill hope, if you abandon working class communities, you create an open wound of discontent that the scape-goaters will stick their fingers in. This is how support for right-wing nationalism grows.

So, a great deal hinges on the choices we make today. The UK is still a £2.7 trillion economy, the sixth richest economy in the world. The money is there for all of us to have decent living standards. We have choices about how we distribute this wealth. It’s a choice to stick with the grim old austerity model, to pit pensioners against workers by axing the winter fuel payment when paying public wage rises. Or the new government can seize its moment and make entirely different choices.

It’s not hard to point to the immediate causes of economic stagnation. One is austerity: lost years of public service cuts under the previous Conservative government. We should not be surprised that slashing essential services creates harm. University of Glasgow academics have linked austerity to more than 330,000 deaths in the 2010s. Austerity also shrinks economic growth. According to one calculation, by 2018 GDP was 16% less than it would have been without Osborne’s cuts.

But there’s another longer-running issue. Chronic under-investment. The UK has the lowest investment rates of the G7 advanced economies. We’re failing in both private investment by businesses, and public investment by the government. Since 2000 our average public investment rate has been just 2.5%, compared to 3.7% across OECD countries. As the Resolution Foundation shows, this means we have built up a public under-investment gap of over £500 billion. The Financial Times’ New Year survey of 100 economists found a resounding consensus: we need “investment, investment, investment”.

If you’re an incoming Labour government with a huge majority and a mission for economic renewal, all the evidence points to two basic lessons. First, don’t impose a new round of austerity cuts. Second, invest.

Here are two choices the government could make today. First, tax the super-rich to restore public services. It is obscene that 50 families now own more wealth than half the country, 33 million people. This is why Unite proposes a 1% wealth tax on the net assets of the richest 1%, which alone would raise £25 billion per year. Alongside other measures, including taxing corporations’ excess profits, we’d have the money to restore vital services. And we’d start to tackle the grotesque inequality that is poisoning our society.

The second choice is to borrow to boost public investment. The evidence shows that major investment drives require government to act as the “investor of first resort”. Unite supports leading economists’ calls to increase public investment by at least 1% of GDP. In fact, this should be a minimum.

There is no getting away from this: without a step up in public investment, we will not manage to rebuild our industries and ensure a genuine workers’ transition to net zero. For example, Unite’s research shows we need investment of £6.6 billion, in the next 5 years, to build a domestic wind manufacturing industry, and create new jobs for North Sea communities. The oil companies are not providing this investment. So, the government must take the lead.

This means jettisoning the straitjacket “fiscal rule” on borrowing. The Chancellor, Rachel Reeves, has said she will stick with the previous government’s rule: that the debt to GDP ratio should be forecast to fall in five years. Reeves argues we need to get growth up, and so the debt ratio down, before we can borrow to invest. The big problem is, without investment you’re not likely to see growth. As Marina Mazzucato, the economist who inspired Labour’s “mission-led” approach, writes, this is “like waiting for your car to start moving before putting in fuel.” Others point to OBR research that shows raising public investment by 1% of GDP could provide a long term boost of 2.5%. In short, it would pay itself back in spades.

Labour must now decide whose side they are on. Some commentators talk about the need for tough choices, but in truth they just mean cuts – a doom-laden road to nowhere. We can’t just keep doing the same thing and expect different results. A return to austerity will simply deliver more misery and division. It will blight working class communities the most and be a gift to the far right, fostering yet more anger and disillusion with the political process. That approach is not just wrong, it’s dangerous. It’s time Government grasped the nettle and asked those that have profited most from decades of deregulation and privatisation, to now help pay to rebuild Britain.

By Sharon Graham, Unite general secretary