Stopping the lockdown from becoming a downturn | Liam Byrne MP for Metro Mayor
Labour’s Shadow Mayor: Immediate kickstart of upto £2.9 billion - plus job guarantee scheme - needed for West Midlands to avoid Great Depression

Labour’s Shadow Mayor for the West Midlands Liam Byrne has called for ministers to prepare an immediate kick-start plan of upto £2.9 billion for the region  ‘to make sure the Great Lockdown doesn’t now become the Great Downturn’ in the heart of Britain.  

Labour’s Liam Byrne is making the call in a major speech entitled: Saving Lives and Saving Livelihoods. He is also calling for a jobs guarantee scheme as discussions with economists reveal that unemployment could rise by up over 150,000 in the West Midlands in the worst case scenario.

The jobs guarantee scheme would be based on the last Labour government’s successful Future Jobs Fund that guaranteed anyone losing their job had work, costing up to £520 million for the West Midlands. The scheme would help the region go from ‘lockdown to lift-off’.

Liam Byrne said:

“Our public services coming together like never before to do incredible things like build the Nightingale Hospital. But now we’ve got one more challenge to face. It’s the challenge of the future. The challenge not just to save lives - but to save livelihoods.  

“It’s the challenge of making sure the Great Lockdown doesn’t now become the Greatest Downturn.

“The truth is this government was slow and late to plan for Covid. We cannot afford a government that is slow and late to plan for the life Post-Covid.”

Commenting on evidence that the West Midlands economy may be hit hardest of all the Shadow Mayor said:

“I don’t want to sugar coat this. I don’t want to hide from you the facts.I think that you deserve to know the truth. There is a risk that our region will be hit hardest of all.

“Both KPMG and Oxford Economics are forecasting that we will take the biggest punch in Britain - with a 10% hit to the economy this year - and 11% next year. 

“That means unemployment in our region could rise to anywhere between 50,000 and 167,000 people. I say this now, because I want us to prepare for it now.”

To save lives and livelihoods in the West Midlands Labour’s Liam Byrne has set-out a four stage plan for the government and Conservative Mayor.

Liam’s plan includes:
  • Giving Mayors and council leaders sweeping new powers to organise the recovery in their regions - based on a proper assessment of who is being hit hardest 
  • An immediate kickstart of between £1.7 billion and £2.9 billion in emergency capital spending to fund green home building, converting offices to council flats, an electric vehicle fleet for public transport, a doubling of the tram network, low cost solar for schools and homes - plus the acceleration of High Speed 2, which is the one of the largest construction projects in Europe. 
  • Enshrine the right to work and support for those losing their job with a new Job Guarantee Scheme, costing between £150 and £520 million in the West Midlands depending on the scale of unemployment
  • Make sure the burden is fairly shared, with the wealthiest taking their portion through tax rises on wealth, carbon and dirty air, unlike the last decade of austerity
Setting out his four point plan Liam Byrne said:

“First London needs to hand mayors and city leaders everywhere, the power to organise the recovery. 

“Second, we need an investment surge to get our economy back on its feet - and put us on a new path. Based on the conversations I’ve had with economists this week, I think we need to be asking for a kickstart of between £1.7 billion and £2.9 billion in emergency capital investment next year. 

“Crucially, we need to use this investment - not to restore the past - but to finance a plan that is big, bold and green. We need to use it our region on a path to zero carbon, in a way that creates jobs for working people. The escape route from lock down must be a fast track to a zero carbon economy. 

“That means jobs fitting cheap solar panels to help families bring down energy bills. It means a huge boost in green home-building - and looking at converting offices which may not be needed to beautiful new homes. It means a big new investment in metro-lines and electric buses. And it means speeding up HS2, which could be the single biggest construction project in the region.

“Today, what we need to enshrine is the right to work. Because if we do not crystallise the emergency wage subsidies into job guarantees for those who ask nothing more than an honest day’s pay for an honest day’s work, then it will prove impossible to restore consumer demand - and get the flywheel of our economy moving again. 

“I want everyone who loses their job to be offered a job guarantee to help keep them in work and spare them and their family unemployment which may last for years.

“Finally, we need to guarantee that as we move into the years ahead the sacrifice of these years is genuinely shared. 

“The truth is that public debt is going to rise. It could go as high as £2.2 trillion pounds next year. In the short term that is the right thing to do - but in the long term that has to be paid down.  

“But what we cannot have, is a repeat of the last decade when the cost of bailing out the banks was born by the poorest in society because George Osborne and David Cameron ripped up the plans I left them, and decided that 90% of the fiscal consolidation came from cuts to spending instead of tax rises on those that could afford it. 

“This time round we will need to make sure that the wealthiest pay their fair share, as we shift the burden of taxes on unearned wealth, poisonous air, and planet-warming carbon.”


Notes for editors:








Forecast (UK)
Oxford Economics
Resolution Foundation 
NIESR
HM Treasury 
1
NAIRU
4%
4%
4%
4%

Forecast Unemployment (2021)
5.5%
5.4%
6.5%
5.5%
2
Output Gap 
0.75%
0.7%
1.25%
0.75%
3
Fiscal Multiplier of Capital Spend
1
1
1
1

Capital stimulus required (as % of GDP) (Output Gap X Multiplier)
0.75%
0.7%
1.25%
0.75%

UK Nominal GDP (2019) (£M)
£2,215,000,000,000
£2,215,000,000,000
£2,215,000,000,000
£2,215,000,000,000

Total capital stimulus (Stimulus Required X GDP)
£16,612,500,000
£15,505,000,000
£27,687,500,000
£16,612,500,000

W Mids as share of UK unemployment
10.4%
10.4%
10.4%
10.4%

W Mids share of stimulus
£1,727,700,000
£1,612,520,000
£2,879,500,000
£1,727,700,000







Notes





1
The non-accelerating inflation rate of unemployment (NAIRUis the specific level of unemployment that is evident in an economy that does not cause inflation to increase. The UK NAIRU is estimated by the OBR at just over 4%. https://obr.uk/box/the-equilibrium-unemployment-rate/

2
The relationship between the output gap and elevated unemployment is, as a rule of thumb, estimated to be between 0.5 and 1. For longer discussion see: https://www.imf.org/external/pubs/ft/fandd/2013/09/basics.htm

3
The fiscal multiplier defines the relationship between £1 of fiscal spending and an impact on GDP growth. The latest fiscal multipliers the OBR uses are provided in the table, taken from their December 2019 Forecast Evaluation Report (Box 2.2). These show different multipliers depending on the type of tax or spending policy implemented. Capital DEL (CDEL) has the highest multiplier, on these estimates, of 1.0 in the first year. Resource DEL (RDEL) is marginally lower at 0.9. This means that a CDEL policy measure worth 1.0% of GDP results in a boost to GDP of 1.0% in year one.
Forecaster
Oxford Economics
Resolution Foundation 
NIESR**
1. Forecast UK Unemployment in 2020 
1,860,000
1,900,000
2,900,000
2. W Mids current share of UK unemployment *
10.4%
10.4%
10.4%
3. Implied W Mids unemployment 2020 (1 X 2) 
182,000
197,600
301,600
4. Current West Midlands unemployment 
134000
134000
134000
Potential rise
48,000
63,600
167,600




Jobs Guarantee



Cost per place***
£3,100
£3,100
£3,100
Total cost
£148,800,000
£197,160,000
£519,560,000





Note: West Midlands unemployment in 1988 was 231,000

Note: the Oxford Economics assessment is not for external use

*Source: House of Commons Library 

** National Institute for Economic and Social Research 

*** Source: TUC