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

Photo: Getty Images
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Responding to George Osborne's tax credit U-turn should have been Labour's victory lap

He changed the forecast, we changed the weather. But still it rains.

The Labour Party should have rested on its laurels in the Autumn Statement. While Gideon name checked his Tory colleagues for their successful lobbying, he should have been reading out the names of Labour members who changed his position.  I'll let the Tories have the potholes, (even though it was in Labour manifesto) but everything else was us. 

He stopped his assault on tax credits. Not because he woke up in his mansion in a cold sweat, the ghost of Christmas Future at the foot of his bed, ringing out the names of the thousands and thousands of children he would plunge into poverty. Nah, it's not that. It's as my sons might say "no way George, you got told!" The constant pressure of the Labour Party and a variety of Lords in a range of shades, supported by that media we are all meant to hate, did for him. It's the thousands of brilliant people who kept the pressure up by emailing politicians constantly that did it. Bravo us, boo nasty George!

As Baron Osborne thanked the Tory male MP for his brilliant idea, to spend the Tampax tax on women's services, I wanted to launch a tampon at his head. Not a used one you understand, I have some boundaries. He should have credited Paula Sheriff, the Labour MP for making this change. He should have credited all the brilliant women's groups, Yvette Cooper, Stella Creasy, Caroline Lucas and even little old me, for our constant, regular and persistent pestering on the subject of funding for refuges and women's services. 

On police cuts, his side should not have cheered him at all. We are now in a position when loud cheers are heard when nothing changes. So happy was his side that he was not cutting it, one can only conclude they really hate all the cutting they do. He should not have taken a ridiculous side swipe at Andy Burnham, but instead he should have credited the years and years of constant campaigning by Jack Dromey. 

I tell you what Georgie boy can take credit for, the many tax increases he chalked up. Increases in council tax to pay for huge deficit in care costs left by his cuts. Increases in the bit of council tax that pays for Police. Even though nothing changed remember. When he says levy or precept it's like when people say I'm curvy when they mean fat. It's a tax. 

He can take credit for making student nurses pay to work for free in the NHS. That's got his little privileged fingers all over it. My babies were both delivered by student midwives. The first time my sons life was saved, and on the second occasion my life was saved. The women who saved us were on placement hours as part of their training, working towards their qualifications. Now those same women, will be paying for the pleasure of working for free and saving lives. Paying to work for free! On reflection throwing a tampon at him is too good, this change makes me want to lob my son's placenta in his face.

Elsewhere in Parliament on Autumn Statement day Jeremy Hunt, capitulated and agreed to negotiate with Student Doctors. Thanks to the brilliant pressure built by junior doctors and in no small part Heidi Alexander. Another disaster averted, thanks to Labour.

I could go on and on with thanks to charities, think tanks, individual constituents and other opposition MPs who should have got the autumn cheers. We did it, we were a great and powerful opposition, we balanced the pain with reality. We made Lord sorry the first Lord of the Treasury and his stormtroopers move from the dark side. We should have got the cheers, but all we got was a black eye, when a little red book smacked us right in the face.