Underfunding public services is bad economics

March 10, 2024

“Good public services need a strong economy to pay for them. But a strong economy also needs good public services.” I can’t disagree with Chancellor Jeremy Hunt’s statement.

I’m all in favour of lowering NI contributions from working people. Just not at the expense of destroying our public services. One in five councils think they’ll go bust this year. 7.5 million people waiting for NHS treatment. Three million people in destitution. Not relative poverty, but destitution. Charities closing. Small businesses struggling. A shoplifting epidemic killing our high streets.

Underfunding public services is bad economics – costing us more in the long term.

Abolishing non-dom status alone won’t help us rebuild them, raising around £2 billion. But the budget now means there’s no difference whatsoever between Labour and Conservative tax policy. Both lock Britain into ever deeper austerity.

Labour were angry at the Tories for adopting their policy. Mind you, it makes a change from Labour adopting Tory policies. Like the two child benefit cap, lifting bankers’ bonuses, and a self-imposed fiscal rule that even right-wing economists say makes no sense.

I find this objection to the Tories abolishing non-dom status baffling. Surely, if it’s a good policy, you want to see it adopted. Candidates in the Mayoral race have adopted some of my policies on public transport. I’m glad about that. They are good policies. In fact, I haven’t heard anyone say they’d drop any of the policies I’ve implemented at the North of Tyne.

If Sir Keir and Ms Reeves don’t like the 2p cut in National Insurance, why do they say they’ll keep it? And if they thought it was a good idea, why didn’t they lobby for it? No wonder only 12% of people trust political parties when they play games with our livelihoods.

We could raise £12 billion by equalising capital gains tax with income tax. Other, very modest wealth taxes on people with assets over £3 million could raise £50 billion a year, and incentivise productive investment. But Labour and the Conservatives have ruled it out. They plan to let the rich get richer, while our councils go bust and a million kids stay hungry.

Mr Hunt also said, “Dynamism in an economy doesn’t come from ministers in Whitehall.” Enough said.

There was some good news. He confirmed the North East’s ‘trailblazer’ status. This puts us in the Premier League of devolution. An extra £100 million on top of the original North East deal. Including £37 million for Sunderland Riverside, where the plan is to build major new film studios. And £58 million for much needed maintenance to the ageing Metro system. Plus influence over central government policy in our region on housing, energy and biodiversity.

What’s been barely reported is the Government has agreed to take forward my proposals on Land Value Capture and a Regional Wealth Fund. I’ve campaigned for these since 2020, and even written academic papers and spoken at think tanks about them. It’s a way of us generating local wealth without taxing either local businesses or people’s incomes.

When the public sector builds new transport infrastructure, for example a Metro extension and stations, the value of the surrounding land shoots up, generating a windfall.

Under my proposals for Land Value Capture no one pays anything until they sell that land. The charge would be less than the windfall, so the landowner keeps a share, and the rest pays for the new infrastructure.

A Regional Wealth Fund of £500 million could create 14,000 jobs by investing in businesses right across our region. Adding to our pipeline of more than 5,000 jobs already – a decade ahead of our target from government. Building a more prosperous North East for the generations to follow.

Best of all, the investment profits come back to the public, rather than disappearing off to hedge funds in tax havens. It’s working already – companies we’ve invested in are returning a profit to the North of Tyne. This new announcement allows us to scale it up.

The first Mayoral hustings were in Durham last week. I asked the audience in if they thought anyone would turn on the public spending taps after the General Election. Not a single hand went up. Not even Labour party members believe their party will end austerity.

But in the North of Tyne we are investing for the long term.

I haven’t raised Council Tax or increased debt. But we have levered in over £300 million from the private sector. We’ve increased enrolments on adult skills courses by 60%. We’re creating jobs 3 times faster than our government-set target. We’re building over 2,000 homes on brownfield land.

When you have a record of achievement across the board, you know it’s not down to luck.

“Growth up, jobs up and taxes down.” Jeremy Hunt might say it. We’ve done it.