Author: Steve Griffiths
Undercooked: the IFS critique of the Labour Manifesto - the long version
Steve Griffiths argues that the respected think tank the Institute for Fiscal Studies (IFS) has been making criticisms of the Labour 2019 Manifesto that fail to reflect on the macroeconomic and human impact of the proposed changes. Discounting the multiple social, health and economic benefits of Labour's Manifesto reveals a very partial and distorted perspective by the IFS.
By limiting itself to a narrow monetarist understanding of fiscal policy, the IFS critique of the Labour Manifesto comes out undercooked. Its conclusions are largely based on an idea of public investment disappearing down a black hole without any beneficial outcome. It fails to grasp the dynamics of social, economic and health policy, suggesting an unwillingness to engage, or perhaps a lack of familiarity, with the wider landscape of current and recent research.
Crucially, it takes no account of the economic, social and health benefits of redistribution: particularly the International Monetary Fund’s belated realisation that putting money into the pockets of the poorest 20% stimulates the economy, because they spend it – and that increasing the income share of the richest slows the economy down.
It’s an approach that places the IFS analysis firmly on the Right.
Expanding the economy by investing in the less well-off, who then spend their money locally (with a knock-on positive effect then on local business, health, wellbeing, productivity, employability and tax receipts) has an obvious impact on the fiscal balance sheet. There is also much evidence of the short- and long-term cost-effectiveness of social and health investment. Of this, not a whisper in the IFS critique. It feels years behind the curve.
More worryingly, the critique is undermined by errors. An example is the claim that ‘dramatic increases in life expectancy’ justify the raising of pension age. As the Health Foundation reports:
“New analysis of mortality data exploring reasons behind stalling life expectancy improvements in the UK has uncovered worrying trends affecting some of the population, including a rising number of avoidable deaths among the under 50s. In fact the slowdown in mortality improvements has been so large that life expectancy predictions are back to where they were 16 years ago.
“Mortality and life expectancy trends in the UK: stalling progress a new report from the Health Foundation based on research by the London School of Economics and Political Science, shows inequalities in life expectancy between the richest and poorest have widened since 2011. While people in wealthier areas of the UK continue to live longer, for those living in the most deprived areas, life expectancy is stalling, or even reversing.
“For the under 50s, while life expectancy improvements continue in European countries such as France and the Netherlands, the UK is falling behind.”
In 2011, I published a blog citing evidence that ‘raising the pension age will be a public health disaster’. I said then:
“the tail-off in the health benefit of work is already pronounced through the sixties (if, of course, the jobs exist in the first place). Add to that the health effects of the socio-economic hierarchy in work [see the Work, Health and Wellbeing section of Fair Society, Healthy Lives for a powerful summary]. The report endlessly quoted by Tories and New Labour as saying that ‘all work is good for you’ is instructive on that. While work is generally good for you, it says: “… in terms of promoting health and wellbeing, the characteristics that distinguish ‘good’ jobs and ‘good’ workplaces might include: safety; fair pay; social gradients in health; job security; personal fulfilment and development; investing in human capital; accommodating, supportive and non-discriminatory (work); control / autonomy; job satisfaction; good communication.””
Disability-free life expectancy is a key figure to watch here. For men in England, it was 63.1 years in 2015/17, a fall of 2 years since 2013/15. For women, it was 62.2 years, 2 years less than in 2010/12. This means that a high proportion of people below that age will be unable to work, with the proportion rising year on year above it. They will depend on sickness and disability-related benefits, or increasingly on Universal Credit, and will lack the cushion of a retirement pension. For those who are well off (‘most’ in the view of IFS) their retirement pension will be taxed.
And why is this life expectancy figure falling? Not austerity surely? The IFS needs to do its homework.
I worked as a frontline welfare rights and community worker, a co-ordinator of a council-wide anti-poverty strategy, a writer of integrated multi-disciplinary area profiles of poverty and health inequality, an architect of a billion-pound preventative investment in supported housing for vulnerable people, and a contributor to the last Labour Government’s Strategic Shift to Prevention and Early Intervention, which drew on the work of thousands of skilled and committed practitioners, managers and researchers. It was a strategy cut down (‘archived’) by the Tory-Lib Dem Coalition in 2010 when it was ready to go, and is now unavailable online. Here are some views from my personal experience. I know that former colleagues in related fields would have similar points to make.
The example closest to my heart is that of Supporting People, because I was intimately involved in its design from 1995 to 2003. Many readers won’t have heard of it because of the nature of our media: well over a billion a year spent from 2003 on a preventative anti-poverty programme to help vulnerable people to live in their own homes – not just sheltered housing, but a considered approach to support for women’s refuges, for people with mental health problems and learning disabilities, for homeless people, ex-offenders, vulnerable young people, all of it supported by evidence and developed alongside practitioners.
There was a near-fatal threat to the sector from Tory cuts in 1997, when without seeking to understand, the Government blamed social landlords for milking the system to provide over-priced support. Under Labour, the programme was redesigned and expanded massively from around £400 million to £1.7 billion. I am proud that in 2008 the evaluation by Capgemini, hardly a woolly lefty consultancy, found:
“the best overall estimate of net financial benefits from the Supporting People Programme is £2.77 billion per annum for the client groups considered (against an overall investment of £1.55 billion).”
I thought the whole thing was virtually forgotten, but the funding section of the 2019 Manifesto refers to a £996 million cut from 2010-11 to 2016-17 (referenced to the National Audit Office). The Labour promise is to restore that cut. It is not spending for fun. It was shown to reduce dependency, promote wellbeing (and employability), and keep people out of hospital and institutional care, in a way that was the diametrical opposite of today’s tabloid- and privatisation-driven policy of contemptuous neglect. It is sustainable investment benefiting hundreds of thousands. So what has been the impact of its felling on the pressure on the NHS? On prison population?
This appears to be unknown territory to the IFS.
Closely related to this is Labour’s commitment to restore health-related preventative services based in the community. Their widespread abandonment by the Coalition is a major reason why the NHS is such a mess. In Sutton and Merton in 2009, I co-ordinated small area mapping of emergency hospital admissions (in areas averaging 1500 population). We were able to map their cost to the NHS at this very local level. Admissions in the quarter of small areas with the highest level cost £17 million in a year; those in the lowest quarter cost £5 million. We found that higher admissions up to the age of 70 were associated with deprivation. We mapped preventative services in those areas, and were set to apply the brilliant Department of Health Guide on best practice to focus on the areas of highest need: ‘whole person, whole system, whole neighbourhood’. Politics intervened. It was a Guide drawn from many sources across the country; now it is unfindable online. It is hard to imagine now the rich potential of that approach before Primary Care Trusts were abolished; emotionally hard to imagine what we would have achieved, and the cost of its loss. The Labour Manifesto is peppered with references to prevention and indeed health inequality.
The IFS? The odd very general reference, but it’s not their brief – or dreamed of in their philosophy. Yet the financial implications are immense.
This local instance was informed by groundbreaking national research into the social determinants and costs of health inequality. The economic context was set out in meticulous detail by Sir Michael Marmot’s team in 2010, just before the election of the Coalition. Commissioned by the Labour Government, their report puts the cost of health inequality in lost productivity, lost taxes, benefit payments and NHS healthcare costs at around £60 billion a year, an amount likely to be considerably exceeded as a result of the policies embraced since then. It affects not only the poor but the whole population. It has no place in the IFS review. Yet the Labour Manifesto is commits at many points to addressing those social determinants of health inequality with major proposals related to income inequality, housing inequality, early years inequality, poor working conditions. The aim now must be to reduce the premature and unnecessary deaths as a result of health inequality identified by Marmot’s UCL Institute of Health Equity: a million deaths over the life of a parliament. Imagine the costs of ill health associated with that. A moral obscenity, it was widely unreported.
In the same way, the IFS does not address potential positive outcomes of economic commitments in the Labour Manifesto, only their immediate cost. Examples include:
- the impact of increased spending power as a result of employment from the Green New Deal,
- the creation of Regional investment Banks to reduce regional inequality,
- increased spending power from an increase in affordable housing, in employment and construction,
- the medium and long-term benefits in child health and educational outcomes from a revival of Sure Start,
- improved work readiness from the investment in adult education, to mention just a few
- and perhaps crucially, increases in the tax take from increased economic activity.
All of these outcomes would change the maths of the IFS assessment. They are reflected in the transformed position of the International Monetary Fund, as well as following a path well trodden for decades by other north European countries.
It is particularly puzzling that searches of the IFS response find no reference to the biggest issue of the age and the centrepiece of Labour’s manifesto, the Green New Deal as a response to the climate emergency. Perhaps we are expected to shrug. It evidently isn’t their bag.
If it is to avoid a result that is lopsided, inaccurate and blinkered, a competent evaluation of the economic cost and impact of the Labour Manifesto would need to draw in other disciplines to achieve an informed view. Such an approach is urgently needed; but there is no sign of such a capacity in the hollowed-out remains of government Labour will be bequeathed from the Conservatives. I recall with intense nostalgia sitting in a meeting with five Government departments and the three devolved administrations and finding to my surprise that the representative of the Treasury had the best understanding of all of them of the value of preventative investment. Paul Johnson’s doubts about civil service capacity are well-founded, and Labour needs to pay urgent heed to the recovery of skilled capacity in government.
It isn’t scientific, nor is it good enough, to fail to follow through the implications of investment in such an ambitious programme. It is a job half done, with the result that it has provided a crooked stick to beat Labour with.
The publisher is the Centre for Welfare Reform.
Accountancy is not Economics - the long version © Steve Griffiths 2019.
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