George Osborne is the Chancellor of the Exchequer in the UK. This is an archaic British title used to describe the UK’s finance minister in the current coalition government. George is desperately trying to explain to the British people why, at the half-way point of the life of the Conservative-led government that is applying severe measures of ‘fiscal austerity’ , there has been no progress at all in controlling the public sector debt level or even in reducing the budget deficit. Austerity is not working on even the basic targets set by the government.
Super-rich Osborne comes from a big business family and went to the top fee-paying school in Britain and then Oxford University along with other leading Conservatives like prime minister David Cameron and darling to the Conservative rank and file, Boris Johnson, the mayor of London. Osborne tells us that it’s true that things have not gone quite as well as he hoped. But the answer is not to reverse the policy of austerity, but to intensify it. He plans to cut the welfare budget by another £10bn, on top of cuts already imposed.
Osborne explained why: “When a hard-working head of the household leaves for work every morning, he can see that the blinds on the windows of the house opposite are still closed. Behind those blinds may be somebody who is on benefits and is not going to work. He is paying for those behind the blinds to stay at home and not work.”
Note that Osborne refers to “blinds”. I have to tell you that most working people usually refer to ‘drawing curtains’ not raising blinds or opening shutters. Blinds are what better off people generally have. Blinds and shutters are the rule for the middle-class and upwards (certainly down my London street); curtains are drawn by the majority. It’s an indication where Osborne is at.
But who are these people, George, who are hiding behind their blinds every morning while the rest of us go to work? Well, they are the retired, women looking after children (they are too busy to raise the blinds), students, the disabled, and yes, the unemployed. But don’t forget some very rich people who don’t need to get up (although I am reliably informed that rich people work very hard running their businesses and property and investment portfolios. So perhaps they are waiting for ‘the daily’ or the ‘help’ to do the necessary).
But let’s consider just those households with the blinds drawn where there are people of working age. How many people of working age are not working in the UK? In the US, it is a considerable number (more than 42%, or around 100m people!). It is way less in the UK. Just 30% of people of working age were not working this morning when George Osborne got up to go to speak to the Conservative party conference on why he was going to cut welfare spending.
Apart from the official unemployed, this 30% are the disabled, people with large families without child care or lone parents, the retired and those in education (students). Interestingly, more of these people are getting to work than before. In the last decade, the percentage of those who are disabled who are working has risen from 38% to 46%. The percentage of lone parents at work has risen from 45% to 57%. Only the share of those with low or no qualifications without work has increased from 56% to 60% (all data from UK Social Trends Report, 2011). No doubt that percentage has risen because nobody will employ a person without qualifications when there are millions with qualifications looking for work.
But perhaps the biggest group of working-age people with their blinds drawn as George set off this morning are those in part-time employment or on shifts. Not everybody goes to work in the morning, George. Many do night shifts or weekend work or all sorts of awkward times. And millions cannot get a full time job or cannot take one because of child care commitments. Since the recession began in the UK, part time work has risen 5%, while full-time employment has fallen 3%. And of those working part time, around 15% wanted full-time work compared to just 8% before the recession. Indeed total hours worked have fallen by over 4% since 2008.
The implication of Osborne’s image is that the people behind the blinds who are not working are undeserving of benefits. They ought to be out working like the rest of us and it’s time we made them by cutting the welfare they are addicted to like a drug. Unfortunately, this view is supported by the majority of British people, according to surveys. About 53% of those asked agreed that welfare benefits were too generous and stopped people “from standing on their own two feet”. Whereas nearly 40% back in 1999 thought welfare benefits should be raised even if it meant more taxes, that figure is now down to just 25%.
Of course, these are loaded questions. If you ask people if the sick and disabled should have their benefits cut, the majority would say no. And most people would be opposed to cutting benefits and social services to those who are confined to their homes because of illness or infirmity. But yet over one half of all the £30bn spent on ‘personal social services’ by the British taxpayer goes to just such people. Less than 25% of this spending goes to able-bodied people, and they have children. As a percentage of GDP, personal social service expenditure in the UK was below that of Greece and Portugal before the crisis broke! (Social Trend Report, ST42 on social protection) and was below the EU average.
There are 1.7m people in Britain who cannot leave their homes and need support from social services. There are about 2.5m people of working age receiving sick and disabled benefits. Are they not ‘deserving’? Don’t they have a good reason not to draw their curtains every morning?
But there are 350,000 British households where no one has ever worked, or 1.7% of all households. This tiny group of less deserving never draw their curtains, it seems. Well, of that 350,000, 80,000 households are student ones. Of the remainder, 40% are lone parents unable to work easily without full-time child care. Of the 370,000 adults in the UK who have never worked and are not students, just under 30% were either unemployed or wanted to find work. So we have 250,000 adults who have never worked in their lives and don’t want to. These are ‘the undeserving’, maybe. They constitute a little less than 0.6% of those of working age in the UK.
The argument from the government is that when somebody gets more from benefits than many get from working, the system is all wrong. That’s a good point. But the government’s answer is to cut benefits, not raise wages. The reality is that living standards for Britain’s low and middle income households will be lower in 2020 than they were a decade earlier even if growth returns. Households in this group are set for income falls of between 3-15% from 2008 to 2020. That’s what a new report called Who Gains from Growth? concludes (http://www.resolutionfoundation.org/us/downloads/who-gains-growth/Who_Gains_from_Growth.pdf). Workers are already on average £1,600 worse off each year than three years ago. That loss will reach an average of £8,500 by 2020. According to the study,workers are just a quarter of the way through the UK’s 12-year wage “dive”. The loss of income will be even worse for families receiving vital tax credits, the very ‘deserving working poor’ that Osborne tries to compare with those behind the blinds.
And it is no better for those who have blinds rather than curtains. For the so-called middle classes, the value of their home is key to their wealth. Most households have little financial assets like cash or shares or own their own businesses. And UK house prices continue to fall in virtually all parts of the country except prime London. The average home in Britain sold for £163,910 in the third quarter of 2012, according to Nationwide. That is 11% below the all-time high reached in the third quarter of 2007. Inflation-adjusted prices have dropped nearly 25% and average house prices are back in real terms to levels last seen in the first quarter of 2003. In other words, all of the gains incurred over the past nine years have been completely wiped out. For most new homeowners in Britain, housing wealth has disappeared.
Britain’s Conservative prime minister of the 1980s, Margaret Thatcher used to boast of the aspiration to create a ‘property-owning democracy’. Well, those who believed that have found it to their cost. Booms and busts in the housing market mean that house prices can end up stagnating over long periods of time in real terms. In today’s money, an average house cost £81,708 in the first quarter of 1975. It was at virtually the same level in Q4-1995, 20 years later. Now the real value of the average home is back to that of 2003 and still falling.
Britain’s welfare budget is around £50bn a year for those of working age and £60bn if child benefits are included (these benefits are also being reduced by the government). So the government plans to cut welfare for this section of society by as much as 20% in nominal terms over the next five years. The welfare budget provides support for the weakest and poorest in the community. Apart from students, who have already been hit by increased college fees, the recipients who are of working age are mainly the unemployed, the disabled, the working poor with large families, lone parents and young people without parents to support them. These are the very people behind the blinds that Osborne plans to hit.