What Cameron’s lost decade means for us

Susan Pashkoff explains the real impact of the Con Dem attacks on working class living standards.

Revised estimates by the Chartered Institute of Personnel and Development (CIPD) are now predicting that 710,000 public sector workers will lose their jobs due to the government’s attack on the public sector. This alone would affect median household income in the UK. Add to this the 1% cap on public worker wages introduced in the Autumn statement which is below the rate of inflation (in October 2011, the CPI was calculated at 5% and the RPI was 5.4% according to the Office for National Statistics) means that real wages for public sector workers are falling. The additional forced increase in pension contributions caused by the government reforms means that money wages (take-home pay) will be falling for state workers.

The new figures released by the Office of Budget Responsibility caused a worsening of projections; The IFS real household disposable income (RHDI) has been falling from 2009 and this will continue until 2014 (with a small projected 0.1% increased in 2014); this is a 4.7% decrease in RHDI over this period which is the largest three year fall in RHDI on record since 1955; with per capita RHDI winding up lower in 2016 than it was in 2006. In terms of real median net household income, it is expected to fall by 7.4% over the period from 2009-13 and in 2015-16, it will be lower than what it was in 2002-3.

Perceptions that the government is trying to balance the budget on the backs of the poorest have been confirmed. The logic of council tax freezes is debatable if they are actually trying to balance the budget; it costs them £675m in taxes. The destruction of local council services is obviously more important than their stated goal of budget balances and brings into clarity that this is an attack on the poorest. The distributional impact of government proposed changes in the Autumn statement clearly demonstrates the lies that austerity measures would be distributed evenly. In 2012-3, while the changes introduced in the Autumn Statement do not affect the lowest income deciles in terms of their loss of income due to reduced benefits; additional income is being taken from the second and third deciles (working poor). As is well known, those worse affected are families with children who will be suffering a 1.6% fall in net income in 2012-13. On the other hand, the middle deciles (5-10) were direct beneficiaries of the changes introduced in the autumn statement will be seeing an increase to projected income arising from the changes in the Autumn Statement.

For anti-capitalists, the impact of the introduction of austerity measures was obvious. As expected, these measures have led to increased unemployment, impoverishment of the poor and working class and the destruction of public services. Rather than leading to increased economic growth driven by the impoverishment of the poor and the working class, the UK is falling deeper into recession.

It has been revealed that 110,000 public sector workers have lost their jobs since April (http://www.bbc.co.uk/news/business-15234228). General unemployment has risen by 114,000 from June-August, jobseeker claimants have risen by 17,500 (up to 1.6m people), youth (ages 16-24) unemployment has reached 991,000 (http://www.bbc.co.uk/news/business-15271800). The Institute for Fiscal Studies (IFS) has projected that government policies would increase the number of children living in poverty by 600,000 in the next four years up to 1 in 4 (from 1 in 5 from the last government), median household income has fallen and is expected to continue to fall and would increase both absolute and relative poverty in the UK. We are experiencing falling money wages brought about by attacks on benefits and pensions and real wages (what wages can purchase) and rising food and energy prices, rising rents, increased VAT and inflationary policies (e.g., quantitative easing).

For anyone not blinded by greed or trapped in the delusions and ideology of neoliberal economics, it was obvious what the impact of these austerity measures would be; clearly if you cut money to the state sector and prohibit local councils from increasing council tax (this prohibition has been renewed this year), services and jobs will be cut. It was also clear that when they pegged benefits and pensions to the CPI rather than the RPI, that benefits would be cut (that was the aim of the policy after all). Cutting child-tax credits clearly only affects those paying taxes, so that would affect the working and middle class; but cutbacks to child benefit, education spending, and provision of local services such as availability of child-care provision affects the poor, working and middle classes. Perhaps it was not obvious to those voting for these measures that making people poorer would actually impoverish them, I thought it was definitional, but is seems that government ministers never bothered to look up the term in their dictionaries. In fact, the rapidity and the depth of the impact of these measures are far worse than initial projections.

I. Public sector workers:

Numbers of public sector workers that have been laid off so far (110,000) since April few months alone indicate that earlier estimates of 610,000 job losses were more accurate than the revised estimate of 4100000 that the government has been using (http://www.bbc.co.uk/news/business-15234228). In the university sector and further education sectors alone they are saying that over 40,000 jobs are at risk (http://www.ucu.org.uk/index.cfm?articleid=5225 and http://www.ucu.org.uk/index.cfm?articleid=4748; for adult education see: http://www.ucu.org.uk/index.cfm?articleid=4508, http://www.ucu.org.uk/index.cfm?articleid=4083).

These workers are not only losing their steady income, but are now facing the prospect of lower benefits due to government policy. Moreover, if they are able to find new jobs in the private sector, they will be paid lower non-union wages, and most probably will be working outside of their specialisations; finally, they will have lost any seniority that they earned over years working in the public sector guaranteeing lower wages than they previously earned.

II. Rising general unemployment:

Unemployment levels have not been this bad since 1994, this is a 17 year high (http://www.bbc.co.uk/news/business-15271800). Unemployment has risen by 114,000 from June-August (see cuts in public sector employment, job cuts by the MNC BAE due to cuts in defence spending, etc). Keep in mind that these are the official unemployment statistics:

“The Office for National Statistics (ONS) said the unemployment rate also increased to 8.1%. The unemployment total for 16-24 year olds hit a record high of 991,000 in the quarter, a jobless rate of 21.3%. The number of people out of work and claiming benefits rose 17,500 to 1.6 million in September. Other figures showed a record cut in the number of part-time workers, down by 175,000, and there was also a record reduction of 74,000 in the number of over-65s in employment (http://www.bbc.co.uk/news/business-15271800).”

Claiming that these figures are the result of the impact of the financial crisis rather than placing the blame on their austerity measures, the government is offering job training for 50,000 workers. As an understatement, this is insufficient and it will not even make a dent in the unemployment statistics. It is becoming quite obvious that cutbacks in the public sector are not being met by private sector investment and increasing employment. Nor will the £75bn of Quantitative Easing by the Bank of England lead to increased investment by the private sector (http://www.bbc.co.uk/news/business-15210112) due to the lack of profitability of investment in productive industries arising from the attack on incomes of the working class and increased difficulties in realisation of the surplus product. What quantitative easing will do is socialise private debt (that is what is being exchanged for government bonds) in anticipation of further bank crashes expected due to Greek default (the bailout of Belgian Bank, Dexia, that was heavily “invested” in Greece, http://www.bbc.co.uk/news/business-15235915 is only the first in the series of future bank bailouts) increase inflation and lower real wages (especially hard for those on fixed benefits and pensions), and lead to further hoarding by banks and the wealthy or investment in short-term speculative investments (exacerbating an already unstable financial market).

III. Falling Incomes and Increasing Poverty:

Clearly “we are not all in this together” as there is no doubt that the austerity measures were clearly implicated in the fall in income, rising poverty and evidence that it was not only the fact that the poor were getting poorer, but the middle class was joining them in their misery (http://www.bbc.co.uk/news/education-15242103; http://www.ifs.org.uk/publications/5710; http://www.ifs.org.uk/pr/poverty_pr_1011.pdf; ). According to the Institute for Fiscal Studies (IFS), this is the biggest fall in median household incomes since the 1970s, a £2000 drop in income for median households. Rising costs due to increased petrol prices, rising energy bills (http://www.bbc.co.uk/news/business-15359312; http://www.bbc.co.uk/news/business-15352599), and rising food prices are undercutting household income.

Part of this is derives from increased VAT introduced by the government and part of it is due to increased food prices due to inflation and then of course there is the rising energy prices (while gas providers are making very high profits).

A. To contribute to impoverishment, rents are rising spectacularly.

“Shelter say that private rents are unaffordable in 55% of English boroughs, having already risen at one-and-a-half times the rate of incomes in the 10 years to 2007 (http://www.bbc.co.uk/news/business-15287743; http://news.bbc.co.uk/today/hi/today/newsid_9614000/9614436.stm).”

Further confirmation can be found below:

“In September, the average rent rose by 0.7% to reach £718 in September, surpassing the previous record high of £713 in August. This represents a 4.3% increase on September 2010’s average of £689. The research also shows the average yield rose from 5.2% in August to 5.3% in September. Rents hit record highs in six regions: London, the South-East, Yorkshire and Humber, the East of England, Wales and the East Midlands.

Rents increased the fastest in the South-East and the East Midlands, where they rose by 1.8% and 1.1% respectively compared to August, while the smallest increases were in the West Midlands and the North East, where rents rose by 0.2% and 0.3%. Over the past year, London’s rents have risen at a faster rate than any other region, increasing by 5.8% (http://www.mortgagestrategy.co.uk/buy-to-let/rents-rise-in-all-regions-for-first-time/1040047.article).”

This cannot solely be explained by supply and demand arguments. The government push towards home ownership rather than renting and provision of social housing has lead to the decline in building of social housing, increased debt for purchasers due to easy (but very expensive credit) has cost people their homes due to rising unemployment and attacks on income. The contraction of the credit market has made it harder for those trying to get on the housing ladder. Meanwhile, tenancy laws favour the landlords rather than tenants in the UK (http://www.globalpropertyguide.com/Europe/United-Kingdom/Landlord-and-Tenant).

While the government’s policy of cutting housing benefits so as to clear out the poor from the centre of London has yet to take effect, this will only compound the problem as displaced people are shifted to the outer boroughs where rents can be covered by housing benefits. However, given rising rents in London the question arises is what will displaced people and current renters be able to obtain given the government’s targeted numbers for housing benefit?

B. In terms of rising poverty in the UK, according to the IFS, projections demonstrate that absolute poverty (having an income below 60% of median household income) and relative poverty (in the sense of comparison to median household income in a specific year) are expected to increase:

“The period between 2009–10 (the latest household income data available) and 2012–13 is likely to be dominated by a large decline in real incomes across the income distribution. Absolute poverty is forecast to rise by about 600,000 children and 800,000 working-age adults. Median income is expected to fall by around 7% in real terms, which would be the largest three-year fall for 35 years (http://www.ifs.org.uk/pr/poverty_pr_1011.pdf).”

Acknowledging that in the longer term, the planned introduction of Universal Credit by the government will act to reduce both absolute and relative poverty, the IFS has maintained that the net direct effect of the coalition government’s tax and benefit changes will be to increase both absolute and relative poverty. This will occur because other changes introduced by the government (e.g., the switch from RPI- to CPI-indexation of means-tested benefits) actually will more than offset the impact on poverty of Universal Credit.

“Absolute and relative child poverty are forecast to be 23% and 24% in 2020–21 respectively. These compare to the targets of 5% and 10%, set out in the Child Poverty Act (2010) and passed with cross-party support. This would be the highest rate of absolute child poverty since 2001–02 and the highest rate of relative child poverty since 1999–2000. Modelling of scenarios in which employment rises by more than expected or take-up of benefits increases (perhaps as a consequence of Universal Credit strengthening work incentives or being easier to understand for benefit claimants) suggests that such factors cannot be relied upon to make a large difference to poverty rates (http://www.ifs.org.uk/pr/poverty_pr_1011.pdf).”

What is the government response to these projections? “The stats are not taking into account that people are being forced back to work due to cuts in benefits” say Iain Duncan Smith, secretary of works and pensions. In this shameful display of Benthamite logic we are forced to conclude that either government ministers are delusional or they are simply lying. Put simply, there are no jobs for these so-called slackers to get; moreover, increased unemployment of public sector workers means that not only do they need to compete with those recently unemployed for low-wage, low skilled jobs that are simply not coming into existence irrespective of how much government ministers are waving their magic wands.

This is a government blinded by its own ideology that poverty exists because the poor are lazy, drunks, immoral and dissolute rather than because capitalist economies cannot sustain full-employment due to the needs of the system for profitability. The level of employment depends on the capital available for the employment of labour as opposed to that used for machinery; this depends on known techniques of production chosen to maximise profits. Competition means reducing wage costs and costs of inputs so as to maximise profitability. Even during the 19^th century where wage costs were incredibly low and there was continual deskilling of labour to drive wage costs down, full employment did not exist. There were extremely high profits, yet full employment was not and has never been consistent with the needs of the system.

C. Rising numbers of people are using food-banks to help cope with fallen income due to benefit cuts and cuts in work hours for those already on low wages (http://www.bbc.co.uk/newsbeat/15035299). This is especially the case for young people that are experiencing high rates of unemployment:

“The Trussell Trust said the numbers of people using its food banks had increased from 41,000 last year to almost 61,500 in the past 12 months. In some areas such as Exeter, Cardigan and the Isle of White, the number of young people was as high as 70 to 80% (http://www.bbc.co.uk/newsbeat/15035299).”

IV. Increased exploitation of workers:

Employed workers are being forced to take wage cuts to keep their jobs in the face of rising unemployment. Benefits like paid holidays are been attacked. People are being asked to work extra hours for the same wages. All these things are increased exploitation of workers.

Take for example, that (e.g., http://www.bbc.co.uk/news/uk-england-london-15199437) public sector workers have been asked to essentially take a wage cut to cover NHS debt caused by cuts to NHS funding by the government by working during paid holidays and doing extra unpaid hours. Funding problems for the NHS by this government are being compounded by attempts to introduce privatisation of certain parts of the NHS by making contracting open to competition; this will leave the NHS open to EU competition laws which will destroy the system.

As the UK falls ever deeper into crisis, it is evident that the neoliberal economic ideas underlying government economic and social policy are responsible for the problem. These attacks on wages, the state sector and the social welfare state are doing exactly what they were meant to do: lower wages in the hopes of increasing profits in the fantasy that this will lead to investment and economic growth. However, wage squeezes do not enable growth, all they do is impoverish.