The entire middle class is being stretched, squeezed and polarised as never before. Photo: Flickr/Tom Page
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Politicians must address the fact that Britain's middle class is rapidly sinking

The idea of middle class decline is too often met with derision, especially among progressives, but all our politicians should be talking about it.

An interesting statistic crept out of the Department for Work and Pensions last week, while the pubs of Britain no doubt buzzed with discussion about Jean-Claude Junker or how someone in Ed Miliband's office may or may not have recognised someone at a FT summer drinks reception.

According to the DWP, the average household income in 2012-13 was £440, unchanged on the year before. It represents the third consecutive year of stagnation or decline (depending on how you cut the figures). As the IFS have noted, in real terms this leaves median household income in roughly the same place as it was in 2002, and comes off the back of painfully slow wage growth from the start of the 2000s.

In the same week the increase in the price of homes reached an all-time high. Add in that a majority of people on typical incomes now have less than one month's income as savings, plus the slow hollowing-out of middle income jobs, and a pretty clear picture emerges. The foundations of middle class life – a decent income, assets, savings, pensions – are getting harder and harder to attain, especially for those just starting out. In many cases, debt has filled the gap.

This goes beyond just failures of the private sector. The welfare safety net has also become residualised. People on reasonable incomes can work their whole life and receive only paltry amounts when they lose their job. When it comes to both work and the state, people in the middle have been putting more in than they've been getting out for a long time.

It should go without saying that working class communities have had it hardest over the last thirty years. But the idea of middle class decline too is too often met with derision, especially among progressives.

Part of this is down to a distorted view of what "middle class" is, a popular association with what is in effect the upper middle classes; the world of piano recitals and Waitrose where "struggle" means difficulty meeting school fees. Of course, the middle class contains many like this too and they are doing more than fine. In fact, the most interesting development that experts have pointed to in recent years is the fracturing and polarisation of the middle class, between the upper echelons and those at the lower end. And previous generations who started out at the lower end of the middle class, bought a house at the right time, settled into a profession and now face retiring near the top may well be the last to make that journey en masse. In short, the bottom is falling out of the British middle class.

There's been a lot of talk about "narratives" recently. There's also been a lot of talk about how Ed Miliband doesn't have "a narrative". But in his defence, he's one of the few at the top of British politics to grasp this phenemenon, whatever his other difficulties. He's not totally alone – some figures on the right, for instance, including the brilliant Peter Franklin at ConHome, have twigged too. But wider interest is otherwise conspicuous by its absence, in Westminster at least.

Instead we get slightly echoey outdated debates about Europe, whether X or Y is "pro-business" or "anti-business", whether a particular view of public services is sufficiently "reforming" and so on and so forth. But surely the shape of that discussion changes in the face of such huge societal shifts? No doubt this failure to catch up is partly because the senior ranks of the commentariat are largely made up of those at the comfortable end of things (themselves probably among the last who can expect to make a good living out of a profession like journalism) - but it's depressing all the same.

To be fair, the answers are neither easy nor obvious. The likes of Resolution Foundation have been fantastic at laying out the problem of stagnating wages and ways to ameloriate it, but no one has come up with a wholesale plan for reversing the trend. Some of this is because it rubs up against global head winds and the modern divorce between power and politics. It probably requires trans-national solutions, or at least a revisiting of the way Britain approaches globalisation – a debate that hasn't even been opened here.

But those who over-play the inability of national government to fix things are also wrong, and usually have a vested ideological interest in doing so (in this sense the argument between those favouring a "bigger" or "shrunken" Labour offer in opposition is mostly phony, and a proxy for a bigger one about what can be achieved in government). Ideas that would be both effective and achievable include wholesale reform of corporate governance to include a significant role for workers; profit-sharing and other ways of spreading wealth; lower-cost routes into home ownership; breaking up and remaking British banking; decentralisation to cities; the prioritisation of vocational "middle skills"; prioritising British industry in procurement; reform of takeovers etc. When it comes to welfare, there is IPPR's National Salary Insurance scheme or SMF's "flexicurity" proposals.

All of this can only start, though, with a recognition that our current journey back to basically the same political economy as we had before the crash is not what success looks like. It wasn't good enough then and it isn't now.

Marx famously wrote:

The lower strata of the middle class... all these sink gradually into the proletariat, partly because their diminutive capital does not suffice for the scale on which Modern Industry is carried on, and is swamped in the competition with the large capitalists, partly because their specialised skill is rendered worthless by new methods of production. Thus the proletariat is recruited from all classes of the population.

Things may not be as apocalyptic or revolutionary now, but they are bad, and contradictions within modern British capitalism mean the lower end of the middle class is sinking. The entire middle is being stretched, squeezed and polarised as never before. The result is entire neighbourhoods – which on the face of things look serene – in fact struggling to keep their head above water, facing futures significantly less secure, less stable and less well-off than their parents. This shapes millions of people's everyday lives and influences their political attitudes, and it should influence our political discussion too. At the moment, though, it doesn't seem to be. Future generations will surely look back and wonder what on earth we were talking about instead.

Steven Akehurst blogs at My Correct Views on Everything

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.