Life after crash: why have hard times made us harsher?

In contrast to previous recessions, after Lehman Brothers crashed the belief that excessive benefits bred indolence spread. This view was endorsed by 61 per cent by 2009. 

Two Britains: a gulf separates the poor from the "squeezed but safe". Photo: Phil Noble/Reuters
Two Britains: a gulf separates the poor from the "squeezed but safe". Photo: Phil Noble/Reuters

George Osborne caps some benefits, time-limits others and invites inflation to eat into them all for years ahead. It amounts to an assault on the welfare state defying all precedent. Despite the recovery, the effect is evident in London’s resurgent rough sleeping and the preponderance of food banks in market towns.

Where Margaret Thatcher hesitated to tread in the 1980s, the polls today suggest that the right is carrying all before it. Why? Because, as I argue in my book Hard Times, the Great Recession has shifted most voters’ calculation about where self-interest lies.

This may seem like a paradox. The collectivist postwar institutions now under attack were put in place in response to the Depression. Back then, fear of a storm that could lash anybody ensured that solidarity rose as the economy sank.

The pattern held into the late 20th century. As unemployment soared by a million between 1990 and 1993, working voters reasoned that “there but for the grace of God go we”. The British Social Attitudes survey found that the proportion suspecting that benefits were “too high and discouraged work” fell to less than a quarter. After Lehman Brothers imploded, in contrast, the belief that excessive benefits bred indolence spread; the view was endorsed by 61 per cent by 2009. Why have hard times got harsher? In essence because, after 35 years of rising inequality, the old understandings about shared risk have ceased to apply.

First, there is the spectacularly unequal incidence of redundancy. After 2008, already inflated unemployment rates for the unschooled, for ethnic minorities and dead-end towns increased more rapidly, often rising twice as fast.

In some disadvantaged subgroups, such as young black men, joblessness exceeded 50 per cent. Meanwhile, the luckier segments of society – white, middle-aged graduates, for instance – were almost immune.

Redundancies occur in every recession; the more distinctive hallmark of the recent downturn – and the current recovery – is unreliable and insecure jobs. These, too, are concentrated among the already disadvantaged and barely affect the middling majority.

The people of Middle England are further protected by property. It provides a substantial cushion against adversity for ordinary homeowners, whose path through the slump was eased by super-low interest rates that did little for renters.

Put it all together, and the chief victims of the recession emerge as almost preordained. The rest can be forgiven if they conclude that hard times hold few terrors. To be sure, most people’s pay packets have been squeezed, but a few years of getting by without a rise is no disaster if you were comfortable before. It does not trigger recourse to the safety net; indeed, the most reliable way to ease the pinch might be to vote for lower taxes even if that leads to lower benefits. Self-interest has a way of warping perceptions, and so this line of thinking slides into suspicions about those who do rely on the state.

The Great Recession has bequeathed Britain two political nations. Among those substantially hit by austerity, 62 per cent told YouGov last year that they rejected the coalition’s cuts as too hasty; among those not much affected, a similar majority of 65 per cent felt that the cutting should be maintained or stepped up. Britons directly affected by the downturn said the government was “too harsh towards people on benefits”; those unaffected said it was “too soft”.

The most vulnerable minority has grown more supportive of state assistance, while the rest have become more inclined to leave victims on their own. Given that the latter are in the majority, the overall drift is rightward.

Saving social security depends on appealing across the economic gulf that separates victims of the recession from the “squeezed but basically safe”, few of whom expect to need the safety net any time soon. A pitch rooted in naked self-interest is not going to work as it might have done in more equal times, but it does not follow that social security cannot be made legitimate to the majority.

New Labour’s tax credits channelled money towards cash-strapped families simply because they were poor, and thereby failed this test. Instead, we must shore up the foundations of economic shelters in working life. This entails, first, looking beyond state benefits, and regulating or nudging employers to do more for their vulnerable staff on security and pay. Second, it entails reinventing social insurance. It would be costly to find funds for, say, a higher rate of Jobseeker’s Allowance for those who have “paid a stamp” or contributed to the community in some other demonstrable way. But doing something explicitly extra for unarguably deserving victims could break us out of the Benefits Street discourse.

The squeezed but safe could coldly conclude that it would be better to go uninsured than pay premiums to cover others. But if they are assured that those being bailed out deserve it, opinion would surely shift. Faced with a welfare system that nobody bothers to explain or defend, those who don’t need help are bound to do the selfish calculation and vote for cuts. The left should take its cue from Franklin Roosevelt’s defence of a “legal, moral and political” right to contribution-based benefits. It might just find that most of us still understand that bad things can happen to good people.

Tom Clark is the author of “Hard Times: the Divisive Toll of the Economic Slump” (Yale University Press, £18.99)

Tags:Welfare