A volunteers sorts through donations of food at the Hammersmith and Fulham food bank run by the Trussell Trust. Photograph: Getty Images.
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Leader: The wealth and poverty of our nation

Social ills that were thought to have been eradicated by modern capitalism are returning. But none of this is inevitable. 

By at least one measure, the United Kingdom has never been better off. GDP is 3.4 per cent above its pre-recession peak, owing to statistical revisions and a year in which the economy grew faster than that of any other G7 country. But rarely has the disparity between the wealth of the nation and the wealth of its citizens been greater.

Social ills that were thought to have been eradicated by modern capitalism are recrudescing. The number of people reliant on food banks to avoid hunger has reached more than a million. There are 60,940 households living in temporary accommodation because of homelessness. And, for the first time, the number of working families living in poverty has outstripped the number of workless and retired ones doing so.

In a 1933 radio debate on the austerity that followed the Great Depression, John Maynard Keynes declared: “Look after unemployment and the Budget will look after itself.” By this, the great economist meant that the government would be wiser to stimulate job creation – and reap the tax receipts that result – than to cut spending in an attempt to reduce debt. Unemployment fell faster in 2014 than any major forecaster expected (from 7.6 per cent to 6.0 per cent) and employment rose to a near-record level of 73 per cent. But the Budget has not looked after itself. The deficit so far this financial year is 6 per cent higher than in 2013-14. Borrowing has failed to fall because work is no longer a guarantee of an adequate standard of living and, therefore, of rising tax revenues.

Rather than the mass unemployment of the 1930s, the UK today faces a crisis of mass underemployment. There are over 1.3 million people working part-time because they cannot find full-time work, with many of the 4.52 million classified as self-employed also lacking the hours they need. In his 1930 essay “Economic Possibilities for Our Grandchildren”, Keynes sought to counter the pessimism of the time by predicting that rising living standards and technological advancements would enable individuals to devote ever less time to their labour. “For the first time since his creation,” he wrote, “man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”

Many are indeed working the short hours that Keynes prophesied but are never free from “pressing economic cares”. Others can meet their needs only by working longer than almost any of their western counterparts. Too many have time for leisure but no money for it, while others have money but no time.

These are some of the defining economic problems confronting Britain. For George Osborne, however, it is the deficit that demands attention above all. The Chancellor has made it his mission, if the Conservatives win the general election, to achieve an overall Budget surplus by the end of the next parliament. He has pledged to do so without further tax rises, including on the wealthiest, a commitment that entails what the Institute for Fiscal Studies has described as “colossal” cuts to public spending. Reductions of this size would shrink the state to its lowest level as a share of GDP since the 1930s, resulting in a profound shift in its duties and responsibilities. The safety net for the poorest would be eroded as welfare benefits were frozen in real terms, offering those on low incomes no protection against inflation. Britain would become a less just and an even more unequal society.

However, there is nothing inevitable about this path. The deficit can be reduced over time through a combination of judicious spending cuts, progressive tax rises and economic growth. Rather than ideologically pursuing a Budget surplus, the state should borrow to invest in pro-growth areas that support lasting prosperity, such as infrastructure, skills, job creation and childcare. It should focus on prevention rather than cure, by switching spending from housing benefit to housebuilding and by incentivising the use of the living wage, rather than subsidising poverty wages. If the short-term costs are higher, so are the long-term savings. To end the avoidable misery of poverty and to create the conditions for human flourishing, Britain must follow this alternative path.

We wish all our readers the very best for 2015. 

This article first appeared in the 19 December 2014 issue of the New Statesman, Christmas Issue 2014

How Jim Murphy's mistake cost Labour - and helped make Ruth Davidson

Scottish Labour's former leader's great mistake was to run away from Labour's Scottish referendum, not on it.

The strange revival of Conservative Scotland? Another poll from north of the border, this time from the Times and YouGov, shows the Tories experiencing a revival in Scotland, up to 28 per cent of the vote, enough to net seven extra seats from the SNP.

Adding to the Nationalists’ misery, according to the same poll, they would lose East Dunbartonshire to the Liberal Democrats, reducing their strength in the Commons to a still-formidable 47 seats.

It could be worse than the polls suggest, however. In the elections to the Scottish Parliament last year, parties which backed a No vote in the referendum did better in the first-past-the-post seats than the polls would have suggested – thanks to tactical voting by No voters, who backed whichever party had the best chance of beating the SNP.

The strategic insight of Ruth Davidson, the Conservative leader in Scotland, was to to recast her party as the loudest defender of the Union between Scotland and the rest of the United Kingdom. She has absorbed large chunks of that vote from the Liberal Democrats and Labour, but, paradoxically, at the Holyrood elections at least, the “Unionist coalition” she assembled helped those parties even though it cost the vote share.

The big thing to watch is not just where the parties of the Union make gains, but where they successfully form strong second-places against whoever the strongest pro-Union party is.

Davidson’s popularity and eye for a good photo opportunity – which came first is an interesting question – mean that the natural benefactor in most places will likely be the Tories.

But it could have been very different. The first politician to hit successfully upon the “last defender of the Union” routine was Ian Murray, the last Labour MP in Scotland, who squeezed both the  Liberal Democrat and Conservative vote in his seat of Edinburgh South.

His then-leader in Scotland, Jim Murphy, had a different idea. He fought the election in 2015 to the SNP’s left, with the slogan of “Whether you’re Yes, or No, the Tories have got to go”.  There were a couple of problems with that approach, as one  former staffer put it: “Firstly, the SNP weren’t going to put the Tories in, and everyone knew it. Secondly, no-one but us wanted to move on [from the referendum]”.

Then again under different leadership, this time under Kezia Dugdale, Scottish Labour once again fought a campaign explicitly to the left of the SNP, promising to increase taxation to blunt cuts devolved from Westminster, and an agnostic position on the referendum. Dugdale said she’d be open to voting to leave the United Kingdom if Britain left the European Union. Senior Scottish Labour figures flirted with the idea that the party might be neutral in a forthcoming election. Once again, the party tried to move on – but no-one else wanted to move on.

How different things might be if instead of running away from their referendum campaign, Jim Murphy had run towards it in 2015. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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