Stronger public finances mean little without investment to raise living standards, NEF warns

The New Economics Foundation reacts to the spring statement.

Lydia Prieg, chief economist at NEF, said:

“Stronger public finances mean little if they come at the cost of the investment needed to raise living standards. The chancellor is staking her reputation on bringing inflation down, but the crisis in Iran shows how our reliance on imported fossil fuels leaves us vulnerable to shocks well beyond our control.

“The spike in gas prices we have seen over the last two days is yet another sign that the government must urgently scale up investment in clean energy. Obsessing over arbitrary fiscal rules cannot be allowed to block essential investment that would improve everybody’s lives and help future prosperity.

“As we have seen over the past few years, it is foolish to rely on higher interest rates to manage supply shocks. The government must step up and not leave everything to the Bank of England.”

George Bangham, head of social policy at NEF, said:

“If the Iran war leads to an energy price shock in Britain, households and businesses won’t be able to afford the pain and the Treasury will have to step in to help.

“The government should immediately prioritise building a better crisis infrastructure for energy costs, that at the very least supports the most vulnerable households with big rises in energy bills.

“Ideally, the government should pass emergency legislation that lets it join together different databases across the Department for Work and Pensions, HMRC and Ofgem, so it can target support towards the households facing the highest bills and whose incomes most restrict their ability to pay them.

“In the medium term, this is all the more reason why we need to reduce our dependency on international fossil fuel markets.”