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
Photo: Getty
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Ruling the waves: should the UK own its offshore wind?

A new report from Labour Energy Forum makes the case for greater public ownership in the offshore sector.

Rule, Britainnia! Britons never, never, never shall be slaves to EU policy again. So goes the thinking of the Brexiteers. But little mention is made of the foreign companies ruling our waves – via offshore wind.

According to a new report by the Labour Energy Forum, over 90 per cent of the UK’s offshore wind is owned by non-UK entities. Plus, over 50 per cent of is controlled by public, often state-owned entities, like the Danish wind company DONG.

In contrast, UK public entities own less than 1 per cent of the total wind farms already built or under construction. That translates to just one single wind turbine: a lonely creature, barely off the beach at Levenmouth in Scotland.

At a time when UK already generates more energy from offshore wind than any other nation and the costs are tumbling, does this ownership model put Britain at a disadvantage?

The government's Department for Business, Energy and industrial Strategy avoids answering this question head-on. Instead it focuses on how overseas investment can benefit service businesses: “Over £11bn of investment in new UK offshore wind farms is due to take place over the next four years with around half of the expenditure in planning, building and running offshore projects going to British companies,” a spokesperson told the New Statesman.

But what about future profit? If offshore wind is eventually able to power domestic demand six times over, as the Offshore Valuation Group predicts, how can the UK public reap the rewards of potential sale abroad?

“The UK has such enormous resources we should be leading, not lagging,” says the Labour Energy Forum’s report author, Mika Minio-Paluello of Transition Economics. Theresa May’s sale of the UK’s Green Investment Bank in April ended the coalition’s experiment in public sector ownership of the green economy, and since then their ambitions have been “limited”.

It doesn’t have to be this way. Minio-Paluello has spent a lot of time in Germany and seen the benefits of the public ownership route. The city of Munich never privatised its local energy supply system, she says. They are now working towards a 2025 target of 100 percent clean energy by building offshore wind farms, including around the UK. “They hadn’t farmed the staff out to the private sector or made as many cutbacks, which meant they could engage with [the renewable transition] as a society as a whole.”

The potential gains for the UK are substantial: from more control over where money is spent and who is employed, to greater tax revenues. “Offshore wind is already breathing life back into ports like Grimsby,” the report says, “but more stimulus and direction is needed. Especially as the fossil-fuel sector gives way to the clean energy economy.”

Yet is the UK already too far behind to catch up and compete with Europe's energy giants? Creating a fully independent public offshore wind company that builds its own wind farms is not a realistic short-term goal, Minio-Paluello says. But you have to start somewhere; the important thing is to be an active partner in the process.

Some UK local authority pension funds have already put money into the Green Investment Bank’s offshore wind fund – yet the hands-off approach means they have no direct influence on how the projects are carried out, staffed and supplied. A more involved option could see UK public bodies operating within the sector in partnership with more established companies. Even as non-operating partners, such bodies could still set requirements on local content and job creation – something that is especially important considering the low union density within the sector at present, the report notes.

A joint enterprise between the non-profit company Energy for Londoners and the Danish energy giant DONG, for example, could build a new windfarm with part UK public ownership. This is not fundamentally different from the councils who already invest in onshore wind and solar farms, Minio- Paluello suggests, “it’s just bigger”.

Such a scheme would allow the UK entities to build up their experience and staffing in the sector, opening the door to grander ambitions in the future. Plus it could bring down energy costs: public companies like DONG and Vattenfall have already led the way towards building subsidy-free sites, while access to cheaper capital can be passed on as savings to the consumer.

Without such interventions, some fear a return to the ill-winds of the Thatcher era, when the revenues from the North Sea Oil boom were squandered and government stakes sold off. “I think it’s quite possible that in 30 years we will look back and ask why did we privatise all our offshore wind sector?” Minio-Paluello says. 

The Labour Party is starting to explore the options, and campaigns like Switched On London and Manchester’s Energy Democracy are also doing their part. But a wind of change must blow from Westminster too – and soon.

India Bourke is an environment writer and editorial assistant at the New Statesman.