Welcome to Cabinetland: The worsening inequality between Britain's rich and poor is shameful

The economic divide in Britain, hastened and worsened by the north-south divide, is wider now than any time since the war, and it is getting worse. That income inequality became worse during the boom is deeply regrettable. But that this has continued into

At the last Prime Minister’s Questions of the session David Cameron was triumphant. “Britain is getting stronger,” he proclaimed. Labour MPs, with caseloads filled with vulnerable people seeing their standard of living collapsing, were incredulous.

As the Coalition moves into its fourth year, the gap between the government and the opposition has widened to more than politics. Increasingly, the two opposing benches reflect two entirely different countries.

In one of these countries, unemployment is 2.6 per cent. The number of people claiming Job Seeker’s Allowance is down over nine per cent on last year. Youth unemployment has plummeted by 19 per cent in the last 12 months, and even over-50s unemployment is down. Each constituency has just 300 people unemployed for longer than twelve months.

These are the average figures for the 21 MPs who are full Cabinet members.

In the other country, there are no Tory MPs. Unemployment is 13 per cent. Every constituency has over 6,000 people looking for work. A quarter of them are under 25. One in three of those people has been looking, fruitlessly, for over a year.

This is the typical situation in the ten constituencies worst affected by the economic incompetence of the Coalition. My own hometown of Middlesbrough, which I now have the honour of representing, is among them.

As David Cameron enlists the help of Barack Obama’s campaign manager Jim Messina, it is perhaps worth looking at the message that handed the US President his only electoral defeat, that of the 2010 midterm elections. The message, repeated ad infinitum by the Republicans, was simple. “Where are the jobs?”

The claim from the Coalition is that “There are more people in work than ever before”. This claim is emblematic of the torturing of figures this government has been pulled up on repeatedly by the UK Statistics Authority. There are more people in work than ever before because Britain has more people than ever before. But the number of people unemployed is higher than it was in 2010. The rate, 7.8 per cent nationally, is unchanged since the Coalition came to power.

Despite herding people onto unpaid workfare schemes and counting that as a job.

Despite freezing the minimum wage for young people at a time of high inflation, cheapening their labour.

Despite a million people on zero hours contracts, unsure of if they will be granted the right to work today.

Further, productivity has fallen. The output per hour of private-sector workers fell by almost four per cent in the year to October 2012, according to data from the Office for National Statistics. Figures for the economy as a whole were not much better, with a 2.4 per cent decline in productivity over the year.

There are more people, working longer, in worse conditions to produce less value. Yet George Osborne has the nerve to crow about an ephemeral 0.8 per cent increase in GDP, in what is now the longest depression in British history.

Nothing has changed. For over three years this government has been treading water. It has done so with impunity, because the people it represents are doing fine. Your income is down, but the FTSE is up.

The targeting of the government resources echoes this twisted view. In response to the chronic household shortage in the UK, the government could have announced a mass house building programme. This would simultaneously have generated jobs for skilled and unskilled labour, in a construction industry still languishing at 14 per cent below capacity.

Instead we got George Osborne’s “Funding for Lending Scheme” (FLS). As of the end of March this year the scheme gifted £16.5bn of low interest loans to the banks. The effect? Mortgage rates have got cheaper, but primarily only on loans where those remortgaging or buying have at least 20 per cent equity in their home, or an equivalent deposit. The people the Chancellor thinks are really in need are those trying to buy a home with only fifty grand in the bank.

Universal credit will be “digital by default”, because who doesn’t have a computer? Benefit payments will be delayed an extra week, because who doesn’t have an overdraft? Legal aid will be cut because who doesn’t have a lawyer on retainer?

The economic divide in Britain, hastened and worsened by the north-south divide, is wider now than any time since the war, and it is getting worse. That income inequality became worse during the boom is deeply regrettable. But that this has continued into the bust is shameful. The average wage rise for those in work who don’t receive bonus payments is just one per cent, while inflation is more than double that. Meanwhile there was a sharp jump in bonus payments in the financial services sector in March this year: end-of-financial-year bonuses were 64 per cent higher than in March 2012.

Whether the blindness of the Coalition to the sufferings of ordinary people is deliberate or merely accidental does not matter. The compact between the richer and the poorer of Britain, Disraeli’s two nations, benefits us all. The deeply corrosive affect it has upon our society might start in Middlesbrough, or Birmingham Ladywood, or West Belfast, but the long term effects of inequality make life worse for everyone.

Andy McDonald is the Labour MP for Middlesbrough

William Hague and David Cameron. Photo: Getty
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The Brexit effect: The fall in EU migration spells trouble for the UK

The 84,000 fall in net migration to 248,000 will harm an economy that is dependent on immigration.

The UK may not have left the EU yet but Europeans are already leaving it. New figures from the ONS show that 117,000 EU citizens emigrated in 2016 (up 31,000 from 2015) - the highest level for six years. The exodus was most marked among eastern Europeans, with a fall in immigration from the EU8 countries to 48,000 (down 25,000) and a rise in emigration to 43,000 (up 16,000).

As a result, net migration has fallen to 248,000 (down 84,000), the lowest level since 2014. That's still nearly more than double the Conservatives' target of "tens of thousands a year" (reaffirmed in their election manifesto) but the trend is unmistakable. The number of international students, who Theresa May has refused to exclude from the target (despite cabinet pleas), fell by 32,000 to 136,000. And all this before the government has imposed new controls on free movement.

The causes of the UK's unattractiveness are not hard to discern. The pound’s depreciation (which makes British wages less competitive), the spectre of Brexit (May has refused to guarantee EU citizens the right to remain) and a rise in hate crimes and xenophobia are likely to be the main deterrents. Ministers may publicly welcome the figures but many privately acknowledge that they come at a price. The OBR recently forecast that lower migration would cost £6bn a year by 2020-21. As well as reflecting weaker growth, reduced immigration is likely to reinforce it. Migrants pay far more in tax than they claim in benefits, with a net contribution of £7bn a year. An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent.

Brexit has in fact forced ministers to increasingly acknowledge an uncomfortable truth: Britain needs immigrants. Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. Brexit secretary David Davis, for instance, recently conceded that immigration woud not invariably fall after the UK leaves the EU. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants."

Though Davis insisted that the government would eventually meet its "tens of thousands" target (a level not seen since 1997), he added: "The simple truth is that we have to manage this problem. You’ve got industry dependent on migrants. You’ve got social welfare, the national health service. You have to make sure they continue to work."

As my colleague Julia Rampen has charted, Davis's colleagues have inserted similar caveats. Andrea Leadsom, the Environment Secretary, who warned during the referendum that EU immigration could “overwhelm” Britain, has told farmers that she recognises “how important seasonal labour from the EU is to the everyday running of your businesses”. Others, such as the Health Secretary, Jeremy Hunt, the Business Secretary, Greg Clark, and the Communities Secretary, Sajid Javid, have issued similar guarantees to employers. Brexit is fuelling immigration nimbyism: “Fewer migrants, please, but not in my sector.”

Alongside the new immigration figures, GDP growth in the first quarter of 2017 was revised down to 0.2 per cent - the weakest performance since Q4 2012. In recent history, there has only been one reliable means of reducing net migration: a recession. Newcomers from the EU halved after the 2008 crash. Should the UK suffer the downturn that historic trends predict, it will need immigrants more than ever. Both the government and voters may only miss migrants when they're gone.

George Eaton is political editor of the New Statesman.

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