Remember “levelling up”? That was the dominant theme of domestic policy just a few weeks ago, a commitment to deliver a fairer, more balanced economy.
On the face of it, things have changed utterly since then. Instead of levelling up deprived areas, we have locked down the whole country in a bid to curb the spread of coronavirus. Businesses have gone under and over a million extra people are now claiming for Universal Credit. Unemployment, long absent from political debate, is set to return.
Meanwhile government borrowing is likely to exceed £200bn per year as the welfare bill balloons and tax revenues collapse – higher than that seen during the financial crisis.
All of this will leave an economic legacy that will dominate public discourse for years to come. Yet even as things change, we should not lose sight of the ideas that gave us “levelling up”. That promise was an acknowledgement that for too many people and places, economic policy had not worked properly or fairly.
When the dust settles on this phase of the coronavirus crisis and the recovery begins, it is vital that we learn the lessons of the last crisis and the era of austerity that followed. The recovery from the financial crisis fuelled political and social turmoil because it left some places behind. The recovery from the coronavirus must be handled more fairly.
Government now faces the job of reducing another debt mountain. Could austerity – that word that dominated the political discourse of the past ten years – also loom large over the 2020s?
It seems that, inevitably, tough economic decisions will need to be made once we get to the other side of this crisis. Savings will need to come from somewhere, and these are likely to take unpopular forms.
My new Social Market Foundation (SMF) report argues that if we are to face “Austerity Round 2”, fiscal consolidation needs to be fair across generations. The past 10 years have seen those of working age bear the brunt of welfare cuts, while universal pensioner benefits such as Winter Fuel Payments were retained. The State Pension was and still is protected by a generous triple lock of earnings, inflation or 2.5% - whichever is higher. The result is that average pensioner incomes rose over the decade of austerity, even as many working-age households were left behind.
Maintaining that triple lock during the coronavirus recovery phase would be to institutionalise unfairness between generations, forcing workers who face turmoil in the labour market to bear an even bigger burden. We cannot ignore the fact that economic turmoil arises from a lockdown policy put in place to - correctly - shield older Britons from mortal harm.
A “fair” saving would be to replace the triple lock with a “double lock” of earnings or inflation - ditching the arbitrary “2.5%” uprating though still ensuring pensions don’t fall behind salaries or prices.
We understand this is a thorny issue to grasp: the SMF inbox has been busy with messages from pensioners taking issue with our report.
But putting the State Pension, which costs around £100bn per year, on a sustainable footing has to be a central plank of policy after the coronavirus crisis. We cannot have a repeat of the past 10 years, where the working age population bore the brunt of government savings.
Replacing the triple lock should be the start of a broader discussion about fiscally sustainable pension reforms - including the need to increase our contributions to private pensions through auto-enrolment.
A way must be found to have a grown-up debate about how to ensure fairness between the generations in the years ahead, but those angry emails demonstrate why politicians can be reluctant to enter this debate. Building on the cross-party spirit politicians have shown during the crisis, an independent Pensions Commission would be a good way forward.
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