Rachel Reeves should announce a significant uplift in public spending in next month’s budget, or risk women bearing the brunt of continuing austerity, a group of campaigning economists argue.
Analysis by the Women’s Budget Group (WBG) suggests the living standards of the poorest women will have declined by a “staggering” 21% between 2010 and 2027-28, if Labour sticks to Jeremy Hunt’s spending plans.
As well as earned income, they take into account changes to the welfare safety net since the Conservative-led coalition came to power in 2010, and the declining standard of public services.
By 2027-28, they calculate that the average woman would be a cumulative 9.4% worse off than in 2010, equivalent to £3,162 a year, while the average man would be 5.8% worse off, or £2,395 a year.
Ignacia Pinto, the senior research and policy officer at the WBG, said: “We know that after 14 years of reckless underinvestment in our public services and punitive changes to benefits, this is a dire inheritance for the new government.
“While ‘fixing the foundations’ is the right approach, this starts with investing in the people and the public services that keep our economy running. We can’t have a healthy economy when millions of people are forced to rely on food banks to feed their families and more and more children are growing up in poverty.”
The WBG is calling for increased spending on public services and welfare, including the abolition of the two-child limit and the benefits cap. It suggests funding these changes through “fairer taxes”, including equalising capital gains tax and income tax, and introducing a wealth tax.
Repeated freezes in working age benefits have been a key driver in the decline in living standards since 2010, the WBG argues, with lone parents hit particularly hard.
Sarah Lambert, the head of policy at the single-parent charity Gingerbread, said, “If our government is serious about its commitment to tackle child poverty it must take action now to transform our social security system so that it provides an effective safety net for those who need support.”
Keir Starmer has insisted his government will make “no return to austerity”, but Reeves has consistently argued that the previous Conservative administration left the UK with a “£22bn black hole” in the public finances.
Labour ruled out most broad-based tax rises during the general election campaign, including increasing income tax, national insurance, corporation tax or VAT.
The chancellor will set out spending plans for the coming year in her budget on 30 October, before carrying out a three-year spending review in the spring.
She is expected to review the way public debt is measured, potentially paving the way for the Treasury to boost investment without busting its fiscal rules, but she has also repeatedly stressed the importance of “taking the tough decisions”.
Lord Darzi’s report on the NHS last week, which highlighted the damage done by years of underinvestment, appeared to signal an increase in health spending, which the government has insisted must be matched by reform.
The WBG analysis comes amid growing debate about the government’s tax and spending plans, last week’s vote in parliament to limit the winter fuel allowance to those pensioners on income-related benefits.
The former Bank of England chief economist Andy Haldane has cricitised Reeves’ approach of choosing to outline the dire state of the public finances in a statement to the House of Commons in July, then leaving most decisions to next month’s budget.
“The black hole event was unnecessary and probably unhelpful economically,” he told Sky News last week, adding that it had “generated a fear and foreboding and uncertainty”.
A government spokesperson said: “Improving economic growth and tackling inequality go hand in hand. That is why the chancellor has vowed to improve the economic opportunities available to women and close the gender pay gap once and for all. That includes strengthening rights at work, investing in childcare and improving equal pay.”
