Poverty and inequality in Blair’s Britain

FRFI 147 February / March 1999

New Labour, proclaims Blair, is directing a ‘middle class revolution’ to transform Britain. Labour’s 10-year programme to tackle poverty and social exclusion will result in ‘an expanded middle class, with ladders of opportunity for those of all backgrounds’. This ever-expanding middle class will ‘include millions of people who traditionally see themselves as working class’, laying the foundations for a new centre-left consensus that will keep New Labour governments in power for many years. Such is the propaganda. The social and economic reality, however, is very different, as DAVID YAFFE shows below.

Sustaining the privileges of significant sections of the more prosperous working class and middle classes is the key to social stability in major capitalist countries like Britain. It is also the condition for winning elections. However, since the crisis of world capitalism began in the mid-1970s, it has become clear that those privileges can only be secured through an increasingly polarised and unequal society, that is, at the cost of the impoverishment of ever greater numbers of working class people. That is why New Labour has fundamentally continued with policies introduced by preceding Tory governments.

After one-and-a-half years of Labour in power, it is, therefore, no surprise to see that Labour’s support among the more prosperous working class and middle class, as well as the rich, has either increased or remained steady, while among the poorer sections of the working class it has fallen. Labour has more than doubled its lead among the more prosperous voters in the South East (up 9 percentage points) and the AB social classes – business and financial executives, senior officials in national and local government and people in the main professions (+9) – and increased its lead (+4) among better-paid white collar workers (C1). On the other hand it has lost ground among council tenants (-6), the unemployed (-8), and DE social classes – people with semi-skilled or unskilled jobs and those living wholly on benefits (-6) and those in part-time work (-7). These results indicate that Blair’s government is continuing to reproduce the social and economic polarisation it inherited.

Recently two publications have appeared which show the degree and extent of inequality, poverty and social exclusion in capitalist Britain. They give the essential background information necessary to understand the policies that Blair’s government has adopted to discipline the poorer sections of the working class, while sustaining and even increasing support among the more prosperous working class, the middle classes and the rich.1

Britain – an unequal society

Although there was significant economic growth in the years before the 1997 General Election, the proportion of people living in poverty, at below half average income, rose to 24% in 1995/7 or 14.1m people,2 an increase of 9.1m on 1979. More than a third (34%) of all children, 4.6m, live below this poverty level, 3.2m more than in 1979. Much of the increase of those living in low income households results from the growth in the number of working age households where no one is in work. Nearly 20% of working age households have no working adult.

Of those living in poverty, 6.7m individuals, a little under half of the total, live in unemployed, single parent, or ‘other’ 3 households with no working adult. This underlies the Labour government’s determination to force the unemployed, single parents, the sick and disabled back into work through the Jobseeker’s Allowance and other coercive schemes. Refusing to raise taxes for fear of alienating its middle class support, it has to cut state benefits and so harasses the poor, the sick and disabled off benefits and into lousy jobs at poverty rates of pay.

Income inequalities grew dramatically from 1979 to the early 1990s, and, following a slight reversal after 1992/3, they have started to rise again. While real average income rose 44% between 1979 and 1995/97, the income of the poorest 10% fell by 9%. The next poorest 40% saw their incomes rise between 5% and 31%, well below the average. On the other hand, households with incomes above average have seen their incomes rise rapidly, the rise accelerating with growing incomes. Those in the top half of the income distribution had rises of more than 40% with the income of the richest 10% rising by a massive 70%. (See Table 1)

In 1979 the richest 10% had more than four times the income of the poorest 10%. By 1995/7 it was nearly eight times. Between 1979 and 1995/7 the share of total income of the top 10% had risen from 21% to 27%, while the share of the poorest 10% had fallen from 4% to 2.2%. The share of the top 50% had risen from 68% to 75% and the share of the bottom 50% fallen from 32% to 25%.

The divisions in society highlighted by these statistics are almost certainly underestimates. They do not cover the whole population. Excluded from the survey are people in residential institutions and homeless people in bed and breakfast accommodation or sleeping rough. At the other end of the scale there is a shortfall of investment income compared with National Accounts, so income at the top levels of income distribution is understated. Finally, as we will show below, these fundamental divisions in society are class divisions, reinforced by government policies.

Class and income

The statistics covering socio-economic groups in the HBAI report give a good indication of the class divisions of those who work or have worked within the previous 12 months.4 They exclude the households where the head of the household has not worked for more than a year because they were unemployed, were sick or disabled or otherwise not available for work. The vast majority of these belong to the working class poor. They also exclude pensioners. More than half pensioners have incomes in the bottom 40% of the income distribution.

Employers, managers and professionals (approximating to AB social groups), as well as intermediate or junior non-manual workers (C1) are predominantly at the top end of the income distribution (see Table 2). 51% of professionals had incomes in the top 20% of income distribution (top quintile). Skilled manual workers (C2) – the largest group of workers – were concentrated around the middle and second highest income distribution. On the other hand semi-skilled and unskilled workers (DE) had incomes predominantly in the bottom 40% of the income distribution, but with a significant proportion of them (one quarter) in the middle of the income distribution. The majority of those in work have relatively high incomes but there is a significant minority who, if not already living in poverty, would quickly find themselves there should economic conditions deteriorate.

In addition there is a great deal of evidence of class divisions on geographical lines, a North-South divide, if London is excluded. Those living in Wales, all English regions from the Midlands northwards and, to a lesser extent, Scotland were underrepresented at the top of the income distribution, with Wales and regions north of the Midlands overrepresented in the bottom fifth of incomes. On the other hand, the South East and eastern regions were over represented at the top of the income distribution. Inequalities were greatest in London, which had the highest proportion of individuals living in the bottom fifth of the income distribution but also was overrepresented at the top. Significantly it is among those in the high income groups and prosperous regions of the country where support for New Labour has increased and among those in low income groups and less prosperous regions where it has fallen. This points to the class character of government policies whether Tory or Labour.

Class divisions will widen

Capitalism inevitably creates inequality and poverty. Capitalist governments if they want to stay in power reinforce such trends. Since the mid-1970s a number of developments have occurred which lie behind the growing inequalities and class divisions in Britain.

The growing crisis of the capitalist system worldwide has seen a rapid rise in unemployment in most major capitalist countries. Official figures for unemployment disguise the real trend. In Britain, unemployment stands at around 1.8m, yet it has been estimated that 4.2m people without work want a job. 40% of 50-65 year olds are not working. Capitalism now is unable to offer decent jobs to ever greater numbers of workers. 75% of jobs unemployed people get on leaving the claimant count are temporary, part-time, self-employed or much less skilled than previous jobs. Many jobs are at poverty levels of pay. 4.7m workers were getting less than £4 an hour in 1998. Over the past five years temporary employment has grown by half-a-million to 1.7m jobs. The Jobseeker’s Allowance simply reinforces these trends and is a central plank of Labour policy to force people off benefits into low paid jobs.

As unemployment has grown and the numbers relying on state benefits have increased, so state benefits have been cut. Rising in line with prices instead of earnings, this policy has been a major contributory factor in increasing inequality and driving millions of people into poverty. Labour will continue with this iniquitous policy. The government has announced that means tested benefits will rise next year by only 2.1% and pensions by 3.2% although average earnings rose 4.6% in the year to April 1998.

While state benefits have been cut, governments have reinforced widening pay differentials through their taxation policies. The reduction of income tax since 1979 has seen a massive redistribution of wealth towards high earners. The subsidies for mortgages; the sale of public utilities and the distribution of shares to the better off; the sale of the highest quality council houses at massive discount; and the tax relief on saving schemes for the better off (PEPs, TESSAs) have all sustained and reinforced the privileges of the more prosperous working class and middle classes. Stocks and shares, TESSAs and PEPs are overwhelmingly held by those in the top 40% of the income distribution. One third of households have no savings at all. Labour will not significantly change any of these developments.

Finally, even the relative high standard of living for many working class and middle class families has been achieved, often at the expense of social and family life, through a growth in two-earner households, longer working hours and evening and weekend work. 1.2m people have two jobs – two thirds of them women – almost double the level of 1984. British workers work the longest hours in the European Union with one third working longer than a 48 hour week. The average weekly overtime worked by full-time workers has increased from four to seven hours for men and from three to six hours for women since 1988. One in two working men and one in three working women work some or most Sundays and one in six workers now works in the evening (The Guardian 4 January 1999).

The coming recession will only aggravate the economic and social circumstances that have produced this increasingly unjust, unequal and unstable society. Blair’s ‘middle class revolution’ will come to grief in confrontation with the overwhelming reality of British capitalism.

1. Households Below Average Income (HBAI) 1979-1996/7 Department of Social Security 1998 and Monitoring poverty and social exclusion Labour’s inheritance Catherine Howarth et al Joseph Rowntree Foundation December 1998.
2. All statistics from HBAI, where available, are given after housing costs (AHC) and include the self-employed. In HBAI, 1995/6 is a two-year average of 1995/6 and 1996/7. I have written it as 1995/7. Average income in every case is the contemporary one for that year. Household income is disposable income adjusted for household size and composition
3. This includes the long-term sick and disabled, students and early retired.
4. They exclude the 5.9m self-employed. Nearly a fifth of self-employed households live in poverty at less than half average income.