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How safe is your job?

This has been a year of financial panic, but 2009 will be dominated by unemployment. In a flexible l

The poster that won the 1979 general election was a fake. The "Labour isn't working" dole queue was ac tually composed of 20 fully employed Hendon Conservatives, photo graphed by Saatchi & Saatchi. But there was nothing synthetic about the impact that the poster had on the Labour government of James Callaghan. Never again, Labour resolved, could the party afford to go to the country when the country was out of work. Yet that is what Gordon Brown risks doing, if you believe the spin about him delaying the next general election until 2010.

This was a year of financial panic as oil prices spiked, banks collapsed and stock markets tumbled. But it is likely that 2009 will be the year of the dole. Unemployment, already higher than at any time since Labour came to office in 1997, is expected to climb to almost three million by 2010, according to the Confederation of British Industry. The turnaround in the UK employment market has been astonishing. The pace of job losses, led by the shake-out in the banking sector, has astounded analysts: the Centre for Economic and Business Research (CEBR) has forecast that 300,000 private-sector jobs will have been lost in the six months to the end of this year alone. The CBI's forecast, made only a few days ago, is almost certainly an underestimate, because it is based on Britain's GDP declining by 1.7 per cent in 2009. The Bank of England is now talking about the economy shrinking by 2 per cent next year, as Britain enters the worst recession since the 1980s. Capital Economics has forecast that unemployment will peak at 3.3 million in 2010.

The situation is already worse than the formal statistics suggest. Stephen King, of HSBC, argues that the official International Labour Organisation unemployment figures exclude two million people who are economically inactive but would like a job.

What is undeniable is that British firms are taking advantage of the "flexible" labour market to fire first and think later. Unusually, the region hardest hit is likely to be the one most able to cope: the south-east. The London area alone could lose 650,000 jobs, according to the Local Government Association. This is one of the wealthiest areas on the planet thanks to the financial services sector based in the City. Redundant middle-class professionals might find life a little different on £60-a-week Jobseeker's Allowance, but most can probably look after themselves. The people who will have their lives destroyed first are the legion of temporary and casual workers, many of whom do not figure in the unemployment statistics because of their age or country of origin.

Many of the new redundancies are unavoidable, but there are signs, too, that some firms are reducing their workforce as a message to shareholders, hoping to bolster their equity prices. When BT announced 10,000 redundancies on 13 November it made no attempt to play down the human cost and, according to some analysts, even exaggerated the job losses for effect.

After three decades of losing industries, the UK desperately needs to protect the skills it has left, not allow them to dissipate in the lengthening dole queues

Firms such as Virgin Media, Rolls-Royce, Yell, Wolseley and Citigroup have all announced thousand-plus job cuts in the past few weeks alone. The flexible labour market, inspired by the Tories and realised by new Labour, has allowed contraction to be a first, rather than a last, resort. It is the quickest way for a management in trouble to show that it is doing something.

The problem is that these job losses, rather like the banks' refusal to lend to small business, are enormously destructive to the broader economy. After nearly three decades of losing productive in dustries, the UK desperately needs to protect those skills it has, not allow them to dissipate in the dole queues. But with trade unions weak, employment law liberal and the government compliant, firms are being allowed to throw out the seedcorn of the future.

Only the state would be able to counter the effects of this attrition. In the pre-Budget report, the Chancellor's measures on benefits, pensions and VAT were intended to boost pre-Christmas demand in the high streets. However, the government is severely limited in its ability directly to fill the jobs gap. Yes, the public sector is still hiring, and will have put on 50,000 jobs in the six months to the end of the year, according to the CEBR. But, with public borrowing likely to reach at least £118bn next year, there will have to be a retrenchment in the labour-intensive public sector to get the public finances into some kind of order in the medium term. Make no mistake - the price of this year's fiscal stimulus is likely to be public-sector job losses, even with the Chancellor's heroic, and unrealistic, assumptions about an economic recovery in 2010.

In this instance, the weakness of the pound is unlikely to boost employment in export industries. This is a global recession, perhaps a global depression, and Britain cannot rely on international markets to replace lost domestic demand. There is also likely to be a wave of protectionism, starting in the US, as countries seek to save their own core industries with state subsidies and other anti-competitive tools. The world market may be a tougher place in which to sell in future. Anyway, Britain has lost most of its manufacturing base - down to 14 per cent of GDP.

In recent years, most of our "exports" have been in financial services - "invisibles", the demand for which will be slight for the duration of the credit crunch.

We can be thankful at least that the right man is in the White House at the right time. Alistair Darling has moved some way towards matching Barack Obama’s plan to create 2.5 million jobs over the next two years through public work projects and alternative energy investment. Yet this will not happen quickly and will do little to alter job losses already in train. And, in America, which is 12 to 18 months further advanced into the recession than Britain, life is already desperate for people on the margin.

The US department of agriculture reported on 17 November that the number of children who went hungry in 2007 - the first year of the credit crunch - jumped by 50 per cent to almost 700,000. It said that, overall, 12.2 per cent of Americans, 36.2 million people, "do not have the money or assistance to get enough food to maintain active, healthy lives". It could happen here.

At the very least Britain faces a return to a period of sustained joblessness, and to the destructive psychology that accompanied it. There will be dole queues, of course, but the social composition of the new jobless - led by financial services, property, retail - will be very different from what we saw in the early 1980s. As a recent report from the Chartered Institute of Personnel and Development argued, those at most risk in the coming "redundancy torrent" will be managers, professionals and skilled non-manual workers.

Tens of thousands of jobs are about to eva porate from British banks. Multiply that by all the professional jobs which depended on those middle-class incomes, such as estate agents and lawyers. Certainly, the first to be hit will be those at the bottom. But they are likely to be joined by large numbers of articulate, middle-class individuals shaken out of the financial, media and peripheral service occupations - from aroma therapy to management consultancy - which have grown up during the long boom.

Middle-class workers are not ready for this and it will be a shock to their self-confidence and self-esteem – a social and cultural transformation that could have profound political implications.

In the 1980s, the middle classes were still relatively secure in their career structures in management and the professions. They had homes, occupational pensions, clear employment paths. Certainly, they were a world away from the trade unionists fighting for their jobs in the old industrial heartlands of Britain. Margaret Thatcher relied on the middle classes to support her war on the militants with their braziers - and to blame them for the recession of the 1980s. The braziers are gone and the industrial working class has largely been dismantled. So, too, have the secure middle-class career structures.

Those who will suffer are the children of the baby boomers, who graduate with high debts and higher expectations

In the 1980s, professional and other white- collar jobs were, by and large, jobs for life, with annual pay increments, annual promotion, pension rights and a predictable future. Not any longer. The modern media, for example, are a shifting sea of freelance and contract workers for subcontractors to the large institutions. Even at the BBC, where I started out, there may be a crust of well-paid performers and anonymous executives who earn more than the Prime Minister, but below that is a huge army of irregulars, often on low salaries, coming in and out of the corporation's revolving doors. The commercial sector has been relying on large numbers of underpaid or unpaid "interns" desperate for work. This is the flexible labour market at its most pernicious. Such practices are widespread throughout the British economy.

Deregulation and leveraged buyouts by private equity over the past two decades have left many firms with flattened management structures, often relying on outside consultants to get them through busy periods. Occupational pensions have become a rarity. Promotion has become intensely meritocratic. Companies increasingly "offshore" white-collar functions to countries such as India, where an educated middle class is willing to work for much lower wages. Most of the job losses at BT are among self-employed contract workers in the UK; the firm has not cut any of the jobs it has outsourced to India.

The group hit hardest is the under-35s, sons and daughters of the postwar baby boomers, who have emerged from university with high debts and even higher expectations. These are the young people who have little experience of recession and none of mass unemployment. Neither have many of their parents, who lived through the 1970s and 1980s largely untouched by unemployment or debt. If there is to be a political response to the new depression, it is likely to emerge from this group of déclassé graduates, many of whom face a future without the security they have been brought up to expect. They will not be able to afford houses or establish careers. Indeed, the under-35s have so much personal debt that their net wealth is actually negative. Three-quarters of the under-35s are in the red, according to the Skipton Building Society, owing more than £9,000 on average. They will look to the state for security, but the state will not be able to deliver.

This time there is no trade union menace to blame for economic distress

A Ministry of Defence think tank has made a remarkable forecast about political militancy. The Development, Concepts and Doctrine Centre published a report in April 2007 in which it speculated that in coming years “the world’s middle classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest”. “The middle classes could become a revolutionary class taking the role envisaged for the proletariat by Marx . . . the growing gap between themselves and a small number of highly visible super-rich might fuel disillusion,” the report said.

The idea of a revolution sweeping suburbia is faintly risible, though it was a subject of a recent J G Ballard novel, Kingdom Come. But the MoD may have grasped an important truth about the nature of politics in the new global economy. It is beginning to erode class differentiation and has left many middle-income earners exposed to the kind of insecurities that formerly afflicted only lower-class workers. Clearly, the economic circumstances of management consultants cannot be compared directly with those of retail workers. But when they lose their jobs, they face very similar challenges: mortgage and credit-card debt, catastrophic loss of earnings and the need for retraining.

Part of the difficulty experienced by the Conservative leader, David Cameron, in developing a coherent political response to Gordon Brown's neo-Keynesianism, is that the party of capital has lost its "class enemy": the industrial working class. There is no trade union menace to blame for economic distress and the Conservatives have had to fall back on "fiscal conservatism" - or reduced public spending. This is simply not a priority for an electorate that is looking to the state to protect it from the predations of the market. Equally, new Labour under Brown has been forced almost against its will to become more critical of the plutocracy running the banks, to accept nationalisation and greatly increased government spending. Brown's government has even had to abandon one of the founding principles of new Labour by proposing higher taxes on the rich.

The Conservatives, who have not entirely lost their Thatcherite reflexes, are looking to the middle classes to react against the new profligacy - but they will find it difficult to do so. As un employment mounts among the middle classes, especially among the under-35s, there is going to be a much stronger demand for policies which promote jobs and growth even at the cost of public borrowing. The Tories cannot afford to be on the wrong side in this battle.

As Martin Hutchinson, author of Great Conservatives, has expressed it: "A world in which few if any have security in their livelihood is not conservative, it is anarchist. It is also deeply repugnant to the average voter."

If Labour isn't working, neither are the Conservatives.

This article first appeared in the 01 December 2008 issue of the New Statesman, How safe is your job?

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The dustman and the doctor: fairness and the student fees debate

The idea that education – all education – should be free is intoxicating and liberating. But there's a problem.

The most toxic political imagery of the student fees debate dates from 2010. First, there was Nick Clegg brandishing a sheet of paper bearing his election pledge that the Liberal Democrats would vote against “any increase” in tuition fees. Then, a few months later, there was the sight of protesters scrawling graffiti and urinating on the statue of Winston Churchill in Parliament Square. Churchill was rapidly restored, but Clegg – who, I am told, did not believe in the pledge when he signed it but could not resist the prospect of those student voters in university towns – never properly recovered.

The issue of how to fund English universities had been febrile for years – long before the 2008 financial crisis, the ballooning of the Budget deficit that followed and the 2010 Lib Dem vote for the vertiginous increase in English tuition fees. (University funding is a devolved matter, with the Scots going their own way.)

In 2004, Tony Blair, enfeebled by the absence of weapons of mass destruction in Iraq, had almost been knocked off his prime ministerial perch when he, too, trebled fees, albeit to a mere £3,000, to be paid back after graduation. Gordon Brown’s allies, smelling post-Iraq weakness, hovered over the Labour leader before allowing him – by a sliver – to survive.

The Conservatives have historically been less troubled by the matter. Students largely have not voted in high enough numbers – certainly not for them – to impinge on their chances of electoral success. Meanwhile, the centre left has had lumps kicked out of it while wrestling with the problem of how best to fund higher education. Jeremy Corbyn’s 2017 manifesto significantly changed Labour’s position, promising to abolish fees altogether; he would also, he told the NME, “deal with” student debt. That half-pledge has now become a vague “ambition” because of its estimated £100bn price tag.

As a piece of campaigning, it worked. By contrast, Ed Miliband got nowhere in 2015 with his promise to reduce fees by a third to £6,000. It was too little, too late to mobilise student voters or their concerned parents, but more than enough for George Osborne, an unrepentant Vince Cable and a nervous higher education sector (sotto voce) to raise questions about Labour’s fiscal rectitude and/or the financial security of universities.

The Institute for Fiscal Studies (IFS), in its disinterested and peskily rigorous way, joined in – and with a more subtle point, suggesting that cutting fees would benefit higher-earning graduates the most. Those who earned less over their lifetime would, in any event, not have to pay all of the money back.

Until Corbyn’s swashbuckling manifesto simplified matters, or oversimplified them, the left had been tied in knots on the fairness point from the moment that tuition fees were introduced, relatively quietly, in the peak-Blair year of 1998.

The idea that education – all education – should be free is intoxicating and liberating. It is intoxicating because one’s Enlightenment reflexes are happily triggered: the pursuit of knowledge is wonderful; knowledge leads to individual self-fulfilment and should be made available to the largest possible number. We all benefit from a better-educated population, not least by the spread of liberal values. Utilitarians rejoice – the country becomes economically more prosperous, though the evidence for this is irritatingly murky.

It is liberating because it is a beautifully simple proposition, and thus the complexity of nasty trade-offs – between those who go to university and those who don’t, between generations, between different sorts of universities, between disciplines and courses, between funding higher education and funding a zillion other priorities – is washed away by the dazzling premise. Free.

Alas, there is a problem. Once upon a time, a British university education was for the very few. The state, in the form of the general taxpayer, footed the bill. Now, around 40 per cent of 18- to 19-year-olds are at university and nobody in front-line politics is keen on hauling down the number, notwithstanding the occasional hyperventilating headline about useless degrees in golf course management or surfing studies.

The Liberal Democrats’ ill-fated 2010 manifesto had a little-noticed passage that called for scrapping the participation target of 50 per cent – alongside the now ritual aspiration to improve vocational training and apprenticeship schemes, a promise that is yet another reminder of a long-established and debilitating British weakness that nobody seems to know how to reverse. But mass higher education is here to stay – and it’s a good thing, too.

We could have chosen (and could still choose) both to fund increasing numbers of people going to university and to pay for all of their tuition, but that would not have been a self-funding investment – at least, not for a very long time. Other European countries with decent universities have indeed managed without asking graduates to contribute anywhere near as much as ours. The Swedes pay nothing for tuition. Dutch students pay a quarter of their English counterparts. The Germans have proportionately fewer students in tertiary education (though their vocational education is widely known to be heaps better), but their students are at university for longer and they pay very little for the pleasure. You get the picture.

It would require a lot of extra taxation if we were to go down that route – and there are many other competing demands beyond deficit reduction. Yet the issue is not only framed by tax priorities. We can’t easily afford to have the state picking up the tab because – an ugly fact – we are less well off than most northern European countries that charge less. Yes, we are the fifth-largest economy in the world – how could any of us, since the Brexit vote, not know that? – but we are far from being the fifth most economically prosperous country in the EU, once you allow for the intrusion of vulgar reality in the form of GDP per head. On that measure, we sit somewhere in the middle of the pack.

So who pays? Asking students to pay something is not in itself an outrage. The massive social and economic privileges that my generation accrued from our gloriously free university education may now be spread more widely but that has not eliminated the personal advantages that, on average, follow a degree. Graduates are more likely to get jobs, more likely to get better jobs and more likely to keep their jobs in a recession. The Department for Education puts the graduate premium on average at £250,000 before tax over a lifetime for women and £170,000 for men. These figures may be overstated and might not be sustained, but it is overwhelmingly likely that most graduates will still benefit materially from their degrees.

From the starting point in 2004 – long before the deficit soared – Blair and his then education secretary, Charles Clarke, decided that graduates should pay more once they began to earn sufficient money. I remember Blair at the time doing a BBC Newsnight special with an angry audience, packed with students telling him that he was wrecking their lives and had insufficient respect for their contribution to the greater good. A very articulate trainee doctor told Blair that she faced a mountain of debt (those were the days – that would now be several mountains). Blair responded with a range of left-wing arguments – at least, if you are of a redistributive frame of mind. Here are some highlights of the exchange:

Blair: I think it is unfair to ask general taxpayers – 80 per cent of whom have not been to university – when you have got an adult who perhaps wants to get an additional skill and they have to pay for it if they don’t go to university, to say to those people: we are not giving you education for free. And to say to under-fives, where we are desperately short of investment, to say to primary schools, where again we need more money, that we are going to give an even bigger subsidy to university students. Believe me, if I could say to you, “You can have it all for free,” I would love to.

The student, more than matching the prime minister’s passion, was spectacularly unimpressed.

Student: It really infuriates me that you say, “Why should the dustman fund the doctor?” When he has [a] heart attack, he will be pleased that I went to university and graduated as a doctor. Therefore he should contribute towards the cost of my degree.

Blair: But surely there should be a fair balance. He is contributing to the cost of your degree. Five-sixths of the cost of any degree, even after our proposals come in, will be contributed by the general taxpayer.

Not bad for a prime minister who was not often associated with causes dear to the dustmen part of his Labour flock – nor associated with redistribution in general. Of course, the figure of five-sixths paid for by the state is now, since the introduction of £9,000 tuition fees, a great deal smaller. The trainee doctor of 2017 is expected, over the course of their lifetime, to fork out much more. The average student debt is getting on for £50,000.

The current numbers are the result of decisions taken by Vince Cable of the Liberal Democrats and David Willetts of the Conservative Party. Unlike Blair, these two men were on the left of their parties, with a firm belief in the importance of education and its positive impact on social mobility. The hike in fees led to protests and occupations but also to universities getting much of the extra money that they needed, even if they were markedly reluctant to say so, doubtless for fear of stirring up their students.

There has been no drop in the participation rate of students from poorer family backgrounds. Quite the reverse – despite Jeremy Corbyn’s personal refusal to believe the evidence. But the repayment of fees means that, in effect, recent graduates pay income tax at a rate of 29 per cent once they earn more than £21,000. (The Department for Education cheerily call this “a contribution”, as if it were voluntary.)

The repayment point could have risen with inflation to ease the load but it hasn’t. That allows the Treasury to recoup more money. Why hasn’t the £21,000 limit been raised? The reason is that, under the current IFS estimates, three-quarters of graduates will not pay back all of their debt after 30 years, at which point it is forgiven. Worse, interest rates on this fee debt are 3 per cent above inflation – and thus nearly 6 per cent above the base rate. That is not quite at Wonga levels but it is patently demoralising and much too steep.

That is far from the end of the matter. Until last September, poorer students received a maintenance grant of up to £3,400 to help with their living costs. For better- off students, the state’s supposition has always been that their parents should and would contribute financially to ensure that their offspring could lead a reasonable life while at university. No government has chosen to make this very explicit: there are only so many enemies you want at any one time on any one issue.

But as the number of students rose, so did the number entitled to the grant, and as part of the strategy to reduce the country’s Budget deficit, those grants were turned into loans, too.

The Labour Party, before Jeremy Corbyn became leader, opposed the change when it was announced but not with much elan. From my Oxford eyrie, I was astonished at how little excitement this generated. Perhaps everyone was exhausted by the failed protests five years earlier.

There is mitigation. It is worth remembering that nobody pays anything for their tuition up front (part of the Blair package, too) and some universities, including mine, have good and reliable schemes to help those from poorer backgrounds and hardship funds for those whose circumstances – normally their parents’ circumstances – change while they are studying.

But I know from direct experience that many students worry a great deal about the debt that awaits them. And if graduates were feather-bedded before 1998 (and that includes me), it is hard not to sympathise now. The debt is too much for too many.

Blair defined the problem correctly – the question of who pays is about striking a fair balance – even if Corbyn seems uninterested in the pain involved in thinking it through and has opted for the easiest answer. But what should that balance be? A graduate tax for those of us who went to university when it was both a much scarcer resource and cheap would offend people who want as little retrospection as possible in the tax system. However, it would do something to deal with generational injustice, a subject on which Corbyn’s credentials are sullied by his fondness for the “triple lock” on pensions.

Labour’s policy of telling English students that they will pay nothing for their tuition is nowhere near as left-wing as it sounds, but it was far too successful a piece of retail politics for anyone in his team to consider going back to the drawing board. So now it is the Tories, facing an energised student vote, who have to engage with the issues for the first time since the tumult of 2010. The least they can do – and they should do it fast – is cut the interest rate. They won’t want to do any of it but, as the man said, the times they are a-changing.

Mark Damazer is master of St Peter’s College, Oxford

This article first appeared in the 01 December 2008 issue of the New Statesman, How safe is your job?