The “squeezed middle”: the key data

The wage squeeze, the rise in wage inequality and the coalition’s benefit cuts.

He may not have mentioned them by name, but Ed Miliband's speech today on the "cost-of-living crisis" was his most explicit pitch yet for the "squeezed middle". The speech was given to the Resolution Foundation (whose chief executive, Gavin Kelly, wrote a recent NS cover story on the "great squeeze") to mark the launch of its new Commission on Living Standards.

Here are three graphs that illustrate Miliband's key points.

1. The Wage Squeeze

In his speech, Miliband noted: "Over the last few decades less of what our economy produces has been paid out in wages – and more in profits. The gains in productivity we have seen have not been reflected in earnings." And here's the graph to back him up.

The chart below, taken from the TUC report Unfair to Middling, shows how wages fell from a postwar high of 64.5 per cent of GDP in 1975 to just 51.7 per cent in 1996. They then recovered slightly to reach 55.2 per cent in 2001 before falling back to 53.2 per cent in 2008.

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2. Rising Wage Inequality

But, as Miliband pointed out, this is only part of the story. The past three decades have also seen a dramatic increase in earnings inequality, as middle- and low-income earners have borne the brunt of the wage squeeze.

The graph below (also from the TUC report) shows that while earnings for the 90th percentile have doubled over the past 30 years, real median earnings have risen by 56 per cent only and real earnings for the 10th percentile have risen by just 27 per cent.

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3. The coalition's benefit cuts will make the situation worse

Combined with rising prices, falling wages and higher taxes, the government's planned benefit cuts will result in the biggest squeeze on living standards since the 1920s. As the graph below shows, the losses that families will suffer as a result far outstrip those from the abolition of the 10p tax band.

The removal of the 10p tax rate cost the average family £232, but the cut in support for childcare means half a million mothers on low to middle incomes will lose almost £500 a year on average, with the hardest-hit losing a remarkable £1,300. The plan to reduce the starting threshold for the 40p tax rate from £43,875 to £42,475 not only means that the marginal tax rate for those affected will double, but also that they will fall victim to George Osborne's raid on child benefit.

The plan to abolish the benefit for all higher-rate taxpayers means a loss of £1,055 a year for one-child families, £1,750 for those with two children and almost £2,500 for those with three children.

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The coalition's decision to raise the income-tax threshold by £1,000 to £7,475 will benefit low-to-middle-income earners by roughly £170. But, as Kelly has pointed out, this is not enough "to offset the rise in VAT, let alone the far larger tax credit cuts". A study by Grant Thornton suggests that the VAT increase will cost each household £517 a year on average.

George Eaton is political editor of the New Statesman.

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Leader: Corbyn’s second act

Left-wing populism is not enough – Labour must provide a real alternative.

Since Jeremy Corbyn first stood for the Labour leadership he has been fortunate in his opponents. His rivals for leader ran lacklustre campaigns in 2015 and failed to inspire members and activists who longed to escape the tortured triangulations of the Ed Miliband era. Later, at the 2017 general election, Mr Corbyn was confronted by a dismal Conservative campaign that invited the electorate’s contempt. Theresa May’s complacency – as well as Mr Corbyn’s dynamic campaign –has helped propel the Labour leader to a position from which he could become prime minister.

With greater power, however, comes greater responsibility. Mr Corbyn’s opponents have for too long preferred to insult him or interrogate his past rather than to scrutinise his policies. They have played the man not the ball. Now, as he is a contender for power rather than merely a serial protester, Mr Corbyn’s programme will be more rigorously assessed, as it should be. Over the months ahead, he faces the political equivalent of the “difficult second album”. 

Labour’s most electorally successful – and expensive – election policy was its pledge to abolish university tuition fees. Young voters were not only attracted by this promise but also by Mr Corbyn’s vow, in an interview with the free music paper NME, to “deal with” the issue of graduate debt. The Labour leader has since been accused of a betrayal after clarifying that the phrase “to deal with” did not amount to a “commitment” to wipe out student debt. In an interview with the BBC’s Andrew Marr, he explained that he had been “unaware of the size of it [graduate debt] at the time”. (The cost of clearing all outstanding student debt is estimated at £100bn.)

In fairness to Mr Corbyn, Labour’s manifesto said nothing on the subject of existing student debt (perhaps it should have) and his language in the NME interview was ambiguous. “I’m looking at ways that we could reduce that [graduate debt], ameliorate that, lengthen the period of paying it off,” he said. There is no comparison with the Liberal Democrats, who explicitly vowed not to raise tuition fees before trebling them to £9,000 after entering coalition with the Conservatives in 2010. Yet the confusion demonstrates why Mr Corbyn must be more precise in his policy formulations. In a hyperactive media age, a single stray sentence will be seized upon.

At the general election, Labour also thrived by attracting the support of many of those who voted to remain in the European Union (enjoying a 28-point lead over the Conservatives among this group). Here, again, ambiguity served a purpose. Mr Corbyn has since been charged with a second betrayal by opposing continued UK membership of the single market. On this, there should be no surprise. Mr Corbyn is an ardent Eurosceptic: he voted against the single market’s creation in 1986 and, from the back benches, he continually opposed further European integration.

However, his position on the single market puts him into conflict with prominent Labour politicians, such as Chuka Umunna and the Welsh First Minister, Carwyn Jones, as well as the party membership (66 per cent of whom support single market membership) and, increasingly, public opinion. As the economic costs of Brexit become clearer (the UK is now the slowest-growing G7 country), voters are less willing to support a disruptive exit. Nor should they. 

The worse that Britain fares in the Brexit negotiations (the early signs are not promising), the greater the desire for an alternative will be. As a reinvigorated opposition, it falls to the Labour Party to provide it. Left-wing populism is not enough. 

The glory game

In an ideal world, the role of sport should be to entertain, inspire and uplift. Seldom does a sporting contest achieve all three. But the women’s cricket World Cup final, on 23 July at Lord’s, did just that. In a thrilling match, England overcame India by nine runs to lift the trophy. Few of the 26,500 spectators present will forget the match. For this may well have been the moment that women’s cricket (which has for so long existed in the shadow of the men’s game) finally broke through.

England have twice before hosted women’s World Cups. In 1973 matches were played at small club grounds. Twenty years later, when England won the final at Lord’s, the ground was nearly empty, the players wore skirts and women were banned from the members’ pavilion. This time, the players were professionals, every ticket was sold, and the match was shown live around the world. At the end, girls and boys pressed against the advertising hoardings in an attempt to get their heroes’ autographs. Heather Knight, Anya Shrubsole, Sarah Taylor, Tammy Beaumont, and the rest of the team: women, role models, world champions. 

This article first appeared in the 27 July 2017 issue of the New Statesman, Summer double issue