SocialismToday           Socialist Party magazine

Socialism Today 112 - October 2007

Poverty in the UK

For working-class people, the link between the policies pursued by a series of governments, Tory and Labour, and rising poverty and inequality has long been clear. Now two authoritative reports, reviewed here by HANNAH SELL, starkly reveal the effects of 30 years of neo-liberal onslaught in Britain.

Poverty, wealth and place in Britain 1968 to 2005

Joseph Rowntree Foundation

The Policy Press, 2007, £15-95


Identity in Britain, a cradle-to-grave atlas

By Bethan Thomas and Daniel Dorling

The Policy Press (University of Bristol) £29-99

SINCE MARGARET THATCHER was elected in 1979 every British prime minister has treated certain policies as absolute truths which must be obeyed without question. Privatisation of public services, cutting back the role of the welfare state, cutting back taxation and regulation of big business and the elites of society: these ‘neo-liberal’ policies have become a kind of unbreakable mantra.

It was the 1945 Labour government, under mass pressure from the working class, which established the modern welfare state. It aimed to combat what were described as the five ‘giant evils’: want, disease, ignorance, squalor and idleness. All three establishment parties would argue that the 1945 model is now antiquated, and that a ‘new approach’ must be found. In fact, the ‘new approaches’ proposed amount to a regression in the direction of the days before the welfare state – with private business, charities and the church providing a highly inadequate replacement for public services in the areas and in the manner that they see fit to do so.

The results are graphically outlined in both of these reports. They entirely refute the idea that neo-liberal policies have improved the lives of the majority of the population. The Joseph Rowntree report concludes that the ‘giant evils’ are not only still present, but increasing. The statistics given in Identity in Britain paint the same picture. Increased poverty combined with a vast and growing gulf between the top and bottom of society is the image that clearly emerges. Broadly, the Rowntree report demonstrates that while ‘want’ – poverty, the central ‘evil’ from which the others flow – fell throughout the 1970s, it has been rising ever since, reaching a similar level to 1970 by 1990. In 1983, 14% of households could not afford three or more necessities compared to 21% in 1990 and over 24% in 1999. The share of disposal income held by the poorest 10% has fallen by over a third since 1979.

The crimes of Thatcherism

THE ROWNTREE REPORT also shows that it was in the late 1970s when the previous steady decrease in inequality was sharply reversed and started its climb to today’s chasm between rich and poor. Both reports vividly portray, albeit in dry statistical language, the brutal destruction that Thatcherism wreaked on British society, in particular on the working class.

A minor aside in Identity in Britain reveals in one dismal fact what Thatcherism meant. It points out that there are almost a quarter of a million more women in their 30s than there are men. By far the biggest imbalances are in the working-class areas where Thatcherism destroyed manufacturing first and most brutally – Glasgow and Merseyside have the biggest discrepancies. Deaths of young men are far higher than for women in these areas, but they still account for a fraction of the difference. Official estimates have assumed that these men are ‘hiding’, and just ‘made up’ men to even out the figures!

Undoubtedly, some ‘disappeared’ in order to evade paying the poll tax. However, Identity in Britain points out that cannot account for the vast majority, who do not appear in any official statistics. They are not registered with the NHS or with an employer. Instead, it suggests that, as in the last two decades of the 19th century when millions left to try and build a new life in the ‘New World’, most of these young men - facing a future on the dole - slipped away from these shores in the style of the television comedy, Auf Wiedersehen Pet, to work as labourers in foreign countries. What many Polish workers are doing in Britain today was done 15 years ago by a quarter of a million young British men.

Thatcher’s policies were no aberration. In fact, the turn to ‘neo-liberalism’ had been begun by the previous Labour government. At root, her policies stemmed from capitalism’s economic crisis and its need to restore profits by driving down the living conditions of the working class. Britain, the world’s oldest and one of the most decrepit capitalist powers, led the way in adopting neo-liberalism, but the rest of the world followed. Britain is still leading the way. It is second in the advanced capitalist world’s inequality index, beaten only by the US. The ratio between the top 10% and the bottom 10% in Britain is 13.5 to one, compared to 9.1 in France and 6.9 in Germany.

And New Labour continues…

NEW LABOUR WAS elected because of an overwhelming desire for something different to Thatcherism. It has distanced itself from some of her most brutal statements, such as her denial of the existence of society, but it nonetheless accepts its fundamental precepts. This is as true of Gordon Brown as it was of Tony Blair. Brown invited Thatcher to tea at Downing Street in order to demonstrate to Tory voters the continuity between Thatcher, Blair and now himself. For millions of working-class people, however, who still have Thatcher’s crimes seared into their memories, it was like a kick in the teeth.

In reality, New Labour has gone further than Thatcher ever dared to in privatising public services, and has not reversed the Tories’ cuts in public spending. When New Labour was elected in 1997 total public spending had fallen to 37.7% of gross domestic product (GDP), its lowest level since the 1960s. New Labour kept it at the same level for its first two years in power. Since then it has increased marginally to around 41%, although this is extremely low when compared with other major European countries such as Germany, and particularly France, where it is still 53%.

Brown consciously increased public spending in the wake of the 2001 dotcom crash in order to try and prevent recession. However, this minor Keynesian measure did not represent a change in New Labour’s approach. On the contrary, it was linked to a major acceleration of privatisation, which meant that many workers did not notice any improvement in public services. In addition, the funding for increased public spending has not been done on the basis of increasing corporation tax, or taxes on the wealthy – they have been slashed. Instead, increased borrowing has funded the marginal increase in public expenditure. New Labour is therefore now trying to balance the books by once again tightening the screws on public spending, particularly on public-sector pay.

Under New Labour the increase in the number of the very poorest, which the Rowntree report describes as ‘core poor’, has reversed, albeit marginally from 14% to 11.5% of society. This is probably in part due to giving away ‘a few crumbs’, minor reforms such as the minimum wage and the working families tax credit. However, the overwhelming reason is the continued growth in the economy – at least, up until now. This has taken place on an extremely unhealthy and uneven basis.

Nonetheless, the increase in numbers in work – on a more and more insecure and low-paid basis – has had an effect on the living standards of some of the very poorest. When a recession does take place, as is inevitable at a certain stage, it will have a devastating effect precisely because the levels of poverty have remained amazingly high given the 15 years of uninterrupted growth of which Brown is so fond of boasting.

While the numbers of core poor have shrunk, the overall numbers in poverty have grown. The number of ‘breadline poor’, that is, those who are financially "excluded from participating in the norms of society", has increased markedly from 21% in 1990 to 27% in 2000. The Rowntree report could not give full figures but indicates that the level may well have increased, and certainly has not decreased, since 2000. It points out that the proportion of the working-age population claiming incapacity benefit increased in most areas of Britain between 2000 and 2005, and connects this to the destruction of manufacturing industry. Even during this period of economic growth the real unemployment rate is far higher than the government admits. If all those who are claiming incapacity benefit and want to work were included in the unemployment statistics this alone would increase the official unemployment rate by around 3% to over 8%.

Statistics from other sources back up the Rowntree report’s suggestion that poverty has continued to increase throughout New Labour’s time in office. The total number of working-age adults who are defined as being in relative poverty because they earn less than 60% of the median income has actually marginally increased to 7.1 million, from 6.8 million ten years ago (Institute of Fiscal Studies, 2007). There are now half a million 18- to 24-year-olds out of work, 70,000 more than in 1998 (Office for National Statistics).

Relative poverty

DEFENDERS OF NEO-LIBERALISM argue that growing inequality and ‘relative poverty’ are not significant because those at the bottom of society are still better off than their parents and grandparents were. The Rowntree report does point out that what people consider a ‘necessity’ changes over time: "For example, when Seebohm Rowntree wrote in 1901 that the poor should be able to afford a stamp to post a letter once a week there were some who thought this frivolous. None would do so today". No-one today could seriously argue that someone is not poor because they can afford to post two letters a week.

Nonetheless, there are those who argue that being unable to afford technology that many take for granted – iPods, access to the internet and the like – does not make you poor. This is not the case. Needs are conditioned by the society people live in. In the modern world, lack of access to a phone or the internet clearly excludes people from the ‘norms of society’, making many practical tasks, such as applying for jobs, extremely difficult.

One of the many interesting facts that the Rowntree report reveals is that it is not ‘modern technology’ which people have to do without in the main. Indeed, there are many who can manage the one-off purchase of a TV, DVD player, iPod and so on, but who cannot afford the daily necessities of life such as a decent home, regularly eating meat or fish, heating their homes or adequately carpeting them.

Another Thatcherite myth which the report blows apart is that the route out of poverty is home ownership. On the contrary, one fifth of ‘income poor’ pensioners had housing equity in excess of £100,000. Identity in Britain points out that a century ago nine out of ten families rented property but that now mortgaging predominates in 94% of neighbourhoods. The report makes the point that a house is by far the biggest asset that the working and middle classes possess. In the US, for example, only 6% of the wealth of the richest 1% is in housing assets. For the bottom 80% it is almost two thirds. Most see buying as the only means to obtain secure accommodation. However, many are stretched miles beyond their means in order to get a toehold on the property ladder. First-time buyers have to spend an average of 20% of their income just to cover the interest payments on their mortgage, never mind paying off the capital.

It is not uncommon for families to have to do without basic necessities, including adequate food, just to try and secure that most basic necessity of all, a roof over their heads. However, as the current crisis in the US housing market shows, where one million have so far lost their homes, a mortgage is no security at all if you lose your job, if interest rates go up, or the value of your house falls dramatically. Again what is striking about both reports is that they show how far people are stretched beyond their means now. They raise a terrifying prospect of how bad things could become when a recession takes place. The increase in poverty has been partially disguised by the huge expansion of credit, with British consumers’ personal debts now exceeding the country’s GDP. However, this huge indebtedness will make the effects of a recession far more painful.

The only positive conclusion that the Rowntree report points to is the increase in the number of young people attending university. In 1968, when the first survey was done, only 200,000 students attended university in England and Wales. By 2000, it was over two million.

Identity in Britain, however, breaks down how class difference still affects whether young people attend university and, if they do, which ones they attend. It points out that 37% of 16- to 24-year-olds work full time, 26% study and do not work, 20% both study and work, and 6% are unemployed. In inner-city working-class areas the numbers attending universities are still very low. For example, only 6% of 18-year-olds go to university in Hunslet in Leeds. By contrast, over 70% of 18-year-olds in Kensington, London, attend university.

Even more interesting however, are the differences in which university students attend. Only in select parts of West London, the Home Counties, and the equivalent areas of Scotland, do a majority of university attendees go to ‘elite’ institutions. By contrast, the majority in the cities of the West Midlands, the North West, the North East, go to the ‘least favoured’ and ‘under average’ universities, which are more like education factories than universities in the traditional sense. Identity in Britain makes the point that the basis for the future major social divide could be "not if you go, but where you go". On average, students currently finish university £22,000 in debt. As the Rowntree report explains, they face a very uncertain future with an enormous millstone around their necks.

Growing inequality

THE ROWNTREE REPORT states that from the late 1970s to the mid-1990s income inequality grew at a faster rate in Britain than in any other advanced capitalist country including the US, and goes on to say: "Britain is moving back to levels of wealth inequality last experienced more than 30 years ago". This process has not reversed under New Labour. Income inequality today is actually higher than it was in 1997 after 18 years of Tory government.

The increase in inequality does not mean that the number of wealthy has increased. It has, in fact, fallen. But a decreasing number of wealthy people have unimaginably vast amounts of wealth. The share of total personal wealth of the top 1% increased from 17% in 1988 to 23% in 2002. This elite lives overwhelmingly in London and the belt around it. The biggest increase in wealth is among a tiny handful of ‘super-rich’, the top 1% of the top 1%. Meanwhile, the share of wealth held by the bottom 50% has fallen from 10% in 1986 to 6% in 2002.

Early 21st century capitalism is characterised by extreme short-sightedness and unbelievable arrogance. The collapse of Stalinism and the weakening of the workers’ movement internationally have left the capitalists imagining that they are truly ‘masters of the universe’, free to pursue their own short-term profits without fearing the consequences. More thinking strategists of capital have tried to warn that they are bound to face a backlash from this orgy of profiteering. At the Davos summit in January of this year, economist Nouriel Roubini put it bluntly: "We have to do something or the backlash is going to be very, very severe". Stephen Roach, chief economist at Morgan Stanley, added that there were signs that inequality was leading to a shift left: "Look at the shares of national income in the major economies of the developed world. The share going to labour is at historic lows; the share going to capital is at historic highs. The pendulum is moving left towards politicians more in favour of pro-labour economic policies. There is potential for a shift in the relationship between labour and capital".

The very nature of capitalism, a blind, unplanned system, means that the world’s capitalist classes are incapable of acting on the warnings given by Roach and co. The Rowntree report estimates that for the government to reach its target of ending child poverty by 2020 it would have to add around £28 billion to planned state expenditure over that time. £28 billion is only £4 billion more than city financiers received in bonuses last year alone. However, New Labour, a government wedded to big business, would react with horror at the very thought of demanding even a fraction the financiers’ profits.

Modern capitalism is not prepared to accept a welfare state in the way it was forced to in the exceptional period following the second world war. Capitalism has, in reality, returned to ‘business as usual’ and is determined to reverse what was given in the past. Only when faced with mass pressure from the working class will the capitalists be prepared to make concessions, particularly in periods of economic crisis. Even then, such concessions will not be of a permanent character. As long as capitalism remains, so too will the drive to undermine workers’ living conditions.

In Britain, perhaps more than other countries, the defeats of the 1980s, combined with the ideological effects of the collapse of Stalinism, have left the working class lacking in confidence of its ability to struggle effectively. Unfortunately, the majority of the national trade union leaders, tied to the coat tails of New Labour, do all they can to encourage that lack of confidence and block effective struggle. As a result, most of the capitalist class are only dimly aware of the volcano upon which they are perched. They would be wise to read these reports and ponder their inevitable political consequences.

Shrinking middle ground

SOCIETY HAS SEEN a marked polarisation between the top and bottom. The number of households that are neither poor nor wealthy declined from 66% in 1980 to 56% in 1990 to 50% in 2000. The three major capitalist parties all rely for their support on what they describe as ‘Middle England’. The Middle English have always been a mythical people designed to act as a cover for the fact that the major parties act not for the majority but in the interests of a tiny elite. In reality, the vast majority of those who get described as Middle England – better-off workers and the middle class in the South East – stand far to the left of all three main parties, overwhelmingly opposing privatisation and supporting an expansion of public services. This would not have been the case 20 years ago, but is the result of experiencing what privatisation and neo-liberalism mean. The severe erosion of the welfare state means that many ‘comfortable’ middle-class families have seen their living standards stagnate.

In addition, one effect of 21st century capitalism is that Middle England is quite literally shrinking. This is at its most extreme in London and the South East, ironically, the very areas in which everyone assumes that Middle England predominates. As the Rowntree report states, regarding those who are neither poor nor rich: "Over time it has become clear that there is less and less room in the south for them; they have either moved elsewhere, or become wealthy or poor".

While a few may have become wealthy, given the fall in the number of wealthy and increase in the number of poor, it is clear that the majority have become poor or, in some cases, have been forced to move in order to try and increase their standard of living.

While the South contains extremes of wealth and poverty, that does not mean that they are living in the same communities. Another clear trend is the increased segregation between classes. The Rowntree report says: "The stratosphere of the boardrooms, where the likes of Lord Browne of BP now earn £6.5 million a year, has moved as far from the average citizen as the addict in a blanket under Waterloo Bridge. They no longer inhabit the same planet as the rest of us, hermetically sealed in smoke-windowed limo, private jet, private island, private everything".

At the same time, the report describes "the clustering of poverty and low wealth in urban areas". In 1980, 5% of people lived in areas where 40% or more of the population was breadline poor. By 2000 it was 17.5%.

Victorian levels of inequality

AS TRISTRAM HUNT pointed out in The Guardian (18 July 2007), we are "heading towards Victorian levels of inequality". Hunt accurately drew a comparison with the situation Friedrich Engels described in his 1845 classic, The Condition of the Working Class in England. Hunt quotes Engels: "The members of this money aristocracy want to take the shortest route through the middle of all the labouring districts to their places of business, without every seeing that they are in the midst of the grimy misery that lurks to the right and the left". Again quoting Engels, Hunt says that the city was designed "to conceal from the eyes of the wealthy" the human cost of their riches, "the misery and grime which form the complement of their wealth".

As Hunt goes on to point out, things are not so different today: "Just as the Victorians spoke of ‘outcast London’ or the ‘dark continent’ of the East End, so today’s extremities of need and greed exist autonomously side by side. Hidden from the sterile corporate village of Canary Wharf – with its speedy tube links and cocooned rail routes – are the crumbling estates of Bethnal Green. Around the corner from the millionaire terraces of Clapham Common is the sprawl of Lambeth. Driven by booming house prices and city excess, the geography of the capital is being steadily fractured. Where once professionals, students, working-class communities and migrants mixed – in places like Notting Hill, Camden or Kilburn – modern wealth extremities are closing neighbourhoods off. The gated community and dark-windowed 4x4 signify the new urban contours".

A voice for the working class

THIS DEEPLY-DIVIDED society does not exist as far as the debating chambers of Westminster are concerned. Class for the establishment parties is an antiquated irrelevance. Yet beneath their feet the system that they defend is creating a vast chasm between the working class, on the one side, and the capitalists and financiers on the other.

The working class is voiceless, disenfranchised. Yet the potential, and the need, for a mass party that stands in their interests is overwhelming. In terms of trade union militancy we are already seeing the beginnings of an upsurge – of workers finding their voice. When 2,100 maintenance workers on the underground brought London to a halt in order to defend their pensions and conditions the City screamed blue murder. The establishment politicians all joined in, including Ken Livingstone mayor of London, pouring vitriol on the head of Bob Crow, general secretary of the RMT union.

Millions of workers, however, watched and cheered on the Metronet workers, just as they had when the prison officers walked out the week before. A mass political voice for the working class – organising and supporting workers in struggle, arguing for a huge expansion of public services and improvements in workers’ pay and conditions, linked to the need for the socialist transformation of society – could very quickly turn the mainly silent, sullen anger of today, into an active fight against the capitalists’ onslaught on our living standards.


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