Goldman Sachs will kick off the controversial bonus season today when they announce their results. That is presumably one reason why Ed Miliband chose this week to launch his challenge to the government around banks. If it hadn’t been for the looming Miliband speech, there would be the usual hand-wringing about bonuses, the usual debate about equality – and the response about how much the City earns for UK plc. In short, the same old stuff. But thanks to the Labour leader’s linking of the issues, there is at least an implication that bonuses need to be an issue for the middle classes.
This is uncharted territory because we have become so used to the idea that the middle classes benefit from the success of the City that we forget that bonuses tend to get recycled into property. which feed into house prices and rents, and slowly prices everyone else out. We haven’t seen how bonus culture – and the extreme salary packets of bankers – are the cuckoo in the nest which feeds into inflation for everyone else. And how they corrode what used to be known as middle class values, morally and economically. We don’t see how the values of financial services are driving out the traditional values of thrift and deferred gratification.
This is important politically because we are, in some ways, still stuck in the Thatcher era when it seemed to be obvious that the interests of the working classes and the middle classes were diametrically opposed. Since then, the economic underpinnings of working class life has been kicked away by global competition. But you only have to look at London to see that the middle classes seem to be on the same track – no middle management, and priced out of the neighbourhoods where they grew up, and their children likely to be priced out of the neighbourhoods they are living in now.
My own small three-bedroomed home in north Croydon is worth £500,000, which will effectively exclude my own children from the area – unless they go into financial services, of course (if I see any of the money, it will replace my non-existent pension and social care insurance).They will live in a landlord-dominated city, paying extortionate rents to the agents of the Far Eastern investors and speculators who chose to rent out their homes, rather than keeping them empty for tax reasons.
No proper pension provision, panic about schooling, their jobs disappearing and their salaries corroding, the middle is being squeezed. If these trends continue – and there seems to be no reason why they shouldn’t – there will be no middle class in a generation, just a tiny elite and a vast, dependent proletariat, which is what the Miliband intervention implied but did not spell out.
It is, of course, partly their own fault. The middle classes misunderstood the emerging financial services sector, assuming it was on their side , when, as it turned out, it wasn’t (as the Lloyd’s Scandal showed in the early 1990s, the failure to learn the lessons of which led to the 2008 banking crisis). They cheered rising house prices without realising they would eventually throttle their children.
So this is also a dangerous moment politically because the beleaguered middle classes are beginning to wake up to the fact that they are heading in the same direction as the working class – precarious, dependent and timed when they go to the toilet at work. They feel excluded by the mainstream parties, which claim to support them but actually don’t, and are flirting with what Jean Marie le Pen used to call the “anti-technocratic” right.
This is an opportunity for Miliband to broaden his own appeal, if that is the main objective, but there is also a much broader opportunity, if he has the nerve. It is to redraw the political battle lines and carve out a new coalition which quietly puts to bed the old battle lines of the 1980s, and begins to work for the beleaguered majority. But that is going to require bold change, and some consensus across the political divide, and will need something much more fundamental than more childcare, a few more banks and raising school standards.
David Boyle is the author of Broke: How to Survive the Middle Class Crisis (Fourth Estate, published 16 Jan)