Andy Burnham used what was widely understood as his Labour leadership launch speech to argue that the UK needs a different economic model to end “40 years of neoliberalism”.
The Manchester mayor, who is likely to mount a leadership challenge against Keir Starmer if he wins a parliamentary seat in next week’s Makerfield by-election, spoke of “good growth” and identified what he called a “gaping omission” in a recent intervention on Labour's future from Tony Blair: stagnant living standards, deepening inequality and the everyday struggles facing millions of households.
Burnham was right. And he’s right to put greater investment in infrastructure at the heart of his agenda to address the ills he diagnosed. But ambition alone won’t be enough. Whoever becomes the next prime minister will quickly face a test: whether to accept the Treasury orthodoxy that helped create those problems, or challenge it.
And that raises another key question: what kind of infrastructure should we invest in?
Most people think of roads, railways, housing and energy networks. The argument is familiar: invest in bricks and mortar, boost economic activity and growth will follow.
But while we readily recognise the economic value of a railway line that gets commuters to work, we struggle to see the same value in a nursery that enables a teacher to stay in her job, or social care that allows the mother of a Disabled child to remain in employment. All three are infrastructure. All make economic activity possible. Yet only one is treated as investment.
Because social infrastructure depends primarily on skilled workers rather than concrete and steel, Treasury accounting rules classify most spending on social infrastructure – health, education, childcare and social care – as day-to-day consumption rather than investment. Borrowing is generally reserved for physical assets that are assumed to generate long-term economic returns.
That distinction might make sense on a spreadsheet. In the real world, it makes far less sense.
Any investment in care in the UK would produce 2.7 times as many jobs as an equivalent investment in construction, according to our research at the Women's Budget Group. This is not to say we shouldn’t build more affordable homes or expand bus routes. It is an argument for recognising that care systems generate economic returns in the form of employment, increased tax revenues and indirect societal benefits.
In fact, one area where we most urgently need growth is the care economy.
The country faces a crisis in social care. NHS waiting lists continue to keep people unwell and out of work. Despite recent expansions in childcare provision, high costs and shortages still force many women to reduce their hours or leave employment altogether. Underfunded social care leaves Disabled and older people without the support they need, while placing unsustainable pressure on families. We know that young people with caring responsibilities are more than twice as likely not to be in employment, education, or training than their peers.
These are economic problems. Yet they are too often discussed as questions of affordability rather than necessity. For decades, politicians have asked how we will pay for stronger care systems. The more important question is who pays when we fail to provide them.
The answer is overwhelmingly women.
Women’s Budget Group analysis has shown that women have borne the brunt of austerity-era spending cuts, with single mothers, Disabled women, women from Black and Asian backgrounds and low-income women experiencing some of the largest losses in living standards since 2010. Women are the majority of public service workers and users, and they continue to perform most unpaid care.
Underinvestment in social infrastructure is never gender neutral. When childcare is unaffordable, when social care is unavailable, when public services are cut back, women absorb the costs through reduced working hours, lower earnings, poorer health and less economic security. The state does not eliminate care needs when it withdraws support; it simply shifts responsibility onto women.
If Andy Burnham is serious about addressing the inequalities he has identified, reforming social care and creating the conditions for “good growth”, he will have to grapple with a fiscal framework that systematically undervalues social infrastructure.
Yet in recent weeks, Burnham has appeared willing to embrace the government's fiscal rules. This is worrying; we cannot afford another autumn budget dominated by speculation about a fiscal hole and arguments over how to plug it. We know where that story ends. Fifteen years of austerity have taught us that when governments are too focused on ‘balancing the budget’, public services and social security are often first on the chopping block.
Instead, the Treasury should recognise social infrastructure as an investment that generates long-term economic returns. It should create a new category of investment spending alongside current spending and capital spending, allowing borrowing for social infrastructure while those returns are realised. And these reforms should be accompanied by a fairer and more progressive tax system that expands fiscal space by taxing wealth more effectively and equalising capital gains tax with income tax.
Furthermore, as the population of retired people grows – with a corresponding increase in spend on the state pension – the fiscal rule that limits government spending on social security means de facto reductions in spend on other forms of social security. Doing so should be a considered choice which balances the impact on citizens, especially women who are much more likely to rely on social security during their lives, rather than being driven by arbitrary rules.
The UK’s economic circumstances are undoubtedly complex. Inflationary pressures are likely to return even stronger as the economic impacts of the war in Iran unfold, and borrowing costs are significantly higher than they were a decade ago. We are not suggesting the government should just borrow without limit, but we do need to broaden what we understand investment to be.
Care has long been treated as a private responsibility rather than a collective necessity; as consumption rather than production. Yet without care, every workplace, business and public institution would grind to a halt.
A country that fails to invest in its social infrastructure is not being fiscally responsible. It is neglecting the foundations on which its economy depends.
Erin Mansell is deputy director at the Women’s Budget Group
