The Observer view on the cost of scrimping on education spending

Sometimes, a single decision reveals a multitude of failings and so it was with the government’s announcement last week that it would be making just £1.4bn of education catch-up funding available. This is less than a tenth of what was recommended by Sir Kevan Collins, the education recovery “tsar”, and a fraction of what some other governments are investing in post-pandemic education catch-up. The rejection of his comprehensive and evidence-based package of extra support for children and young people prompted Collins’s resignation, accompanied by an attack on the government’s “half-hearted approach [which] risks failing hundreds of thousands of pupils”.

Much of the blame for a wider failure to alleviate the impact of the pandemic on children and young people can be laid at the door of the prime minister and the education secretary, Gavin Williamson. But this particular decision also reveals a great deal about the poor decisions of chancellor, Rishi Sunak, who, like his predecessors, exerts a great deal of power over spending policy. Sunak reportedly blocked Collins’s recommendations for more funding because he regarded the evidence for extra investment in children as “thin” and because he said the government had no means to pay for it. Collins is the former long-serving chief executive of the Education Endowment Foundation, set up by the government to provide regular, independent assessments of the evidence.

It speaks volumes that Sunak might rate his own assessment above that of an internationally respected independent expert. But it is also economically illiterate to argue that all pandemic recovery decisions have to be paid for through higher taxes or cuts to spending, rather than through borrowing to invest – not just in improving children’s lives, but also in reducing the long-term costs of the pandemic to the nation’s finances . The Institute for Fiscal Studies says the education costs of the pandemic could be in the region of £350bn in lost lifetime earnings across this generation of children.

This is symptomatic of the wrong-headed economic thinking at the heart of government, epitomised by Sunak’s fiscal hawkery. He deserves credit for quickly rolling out a generous furlough scheme last spring, even if it left too many self-employed people without support. But so many decisions have been dangerously misguided. He refused to fund a decent level of sick pay for those who have to self-isolate, reducing levels of compliance for those for whom the choice was between going out to work or not feeding their children. His “eat out to help out” scheme gave people financial incentives to mix in enclosed spaces late last summer. He reportedly opposed those in cabinet arguing for an earlier lockdown last autumn in line with expert scientific advice. His reasoning was based on a misunderstanding of basic maths: that an exponentially spreading virus makes the choice not between social restrictions versus economic costs today, but social restrictions and economic costs today versus worse social restrictions and higher economic costs later. The delay in locking down in autumn, backed both by the prime minister and chancellor, was one of the worst decisions of the pandemic and partly accounts for the more severe death toll of the second wave.

Sunak’s Conservative predecessors left the NHS with the tightest funding settlement in its 70-year history, overstretched and with barely enough capacity to manage a bad winter flu season, let alone a pandemic that was sufficiently anticipated that it was near the top of the national risk register. And the education funding decision is symptomatic of his broader approach to post-pandemic recovery: false economy today, even if it costs dearly tomorrow.

Boris Johnson has spoken of his desire to “level up” the country by reducing regional inequalities. Yet 10 years of Tory spending cuts have disproportionately affected less affluent areas and cuts to financial support for low-paid parents have widened income inequality and increased levels of child poverty.

There is little evidence that Johnson or Sunak are willing to commit the levels of investment needed to address some of the biggest regional inequalities of any rich nation.

The bad economic decisions of the last year are primarily political, but there are deeper, longstanding institutional problems with an over-mighty Treasury. The chancellor has vast powers invested in him via the Treasury, which sets the government budget, determining what departments can spend, therefore giving it significant policymaking power. It controls fiscal policy, sets taxes, manages the national debt and has responsibility for economic policy designed to maximise long-term growth. This contributes to short-termist and over-centralised decision-making.

A recent proposal by the thinktank Nesta to split the Treasury into finance and economic ministries, with budgetary decisions absorbed by the prime minister’s office, in order to improve the quality of long-term economic decision-making, merits serious consideration.

False economies by Conservative chancellors have proved costly over the last decade, but during the pandemic those effects have been magnified. Sunak’s approach to economics has not just harmed the nation’s finances over the last year, it has cost people their lives. And his failure to stump up more education investment will depress the life chances of a generation of children.