“A return to normal.” This is how Richard Hughes, Chair of the Office of Budget Responsibility, described the spring budget. The implication is that our problems are caused by discrete crises (the pandemic, the Ukraine–Russia war etc.) and will end when they do.
However, the issues besetting Britain are much more structural and are even starting to affect the relatively well-off.
The UK has a democracy in decline. It has increasing poverty and inequality but the budget proposes no action on many of their key drivers, including soaring rents, benefit cuts and rising food and fuel costs. It only offered sticking plasters: a three-month extension of the £2,500 energy price guarantee and the ditching of planned rises in fuel duty.
The government has deteriorating public finances. We have seen productivity and business investment flatline since 2016 and the economic forecast is grim. Debt has ratcheted up to close to 100 per cent of GDP. We have the lowest growth (at 0.5 per cent) since the 1970s, a weak growth forecast for 2023 and a £50 billion deficit. We are all a lot poorer now than we were before 2008. GDP per head in the UK is more than 30 per cent lower than if pre-2008 growth trends had continued. We are also an older country with increasing health inequalities. Yet British public services have been gutted and, following this budget, their day-to-day funding will remain broadly flat over the next two years, with a reported 10–14 per cent reduction in unprotected departments. Public sector workers continue to face falling real-term pay. Most ominously of all, the budget proposes nothing to prepare for climate change.
In this context, it is an understatement to say that this budget is nowhere near as ambitious as it should be. Its focus instead was to spur on economic growth by getting Brits either back to work or working longer. We are, after all, working fewer hours than before the pandemic. To achieve this, the budget introduced harsher benefits regimes to sanction older, inactive people in order to get them back into work, despite the fact that 18 per cent of the over-50s who have left work since March 2020 are on an NHS waiting list.
Hunt’s budget also included incentives for higher earners. Middle- and top-earning parents of younger children between 9 months and 3 years old will benefit from 30 hours of free childcare per week. Older higher earners will theoretically be motivated to work for longer as a result of the announcement of pension tax relief (the scrapping of the pension lifetime allowance). This latter policy was described by Torsten Bell as ‘throwing a load of money at a small number of people’.
While researching for our forthcoming book, we learned that high-income earners, as would be expected, are less likely than the rest of the population to support redistribution, taxation and public services. As such, they would have welcomed the pension reform and childcare support offered in the budget but baulked at its £1,500 tax hit for the richest fifth from the freeze in personal tax threshold changes and a cut to the additional rate income tax threshold. This is because many high earners are beginning to feel the pinch of a cost-of-living crisis and wage stagnation.
The fact is now that most in the top 10 per cent sit, in absolute terms, much closer to the median earner than to the truly wealthy, the owners of capital. And this budget does nothing to address the longer-term causes of this: growing levels of inequality, particularly extreme wealth inequality, that leave them trailing even further away from those above them in the income distribution, and present fundamental threats to their children’s social reproduction.
However, high-income earners are likely to continue thinking that this budget doesn’t have much to do with them, as they have been relatively insulated from crises so far and have underestimated their reliance on public services. This is foolhardy. First, they have longer life expectancy than the rest of the population. Second, they make greater direct use of services. And third – and this is key – the quality of public services and infrastructure has an indirect impact on all of our lives, including that of high earners. A doctor in a private hospital will most likely have been trained at public expense, for example. Business owners depend on the state for their employees’ healthcare. As Wilkinson and Pickett have demonstrated, we all benefit from healthier populations, public transportation, green spaces, safer streets, a more educated society and a stronger democracy.
High earners also doubt the state’s ability and capacity to improve their lives. This doubt is not helped by the budget’s confirmation that the two major political parties are closer than at any time since 2008. Both parties broadly support the consensus that continued privatisation of utilities, the precarity of our labour market and the dominance of the financial sector in our economy is the way to progress.
Everyone – and in particular high earners – must question this ‘common sense’ and ask why we have been so accepting of a way of running the economy that continues to deliver profits to the very top rather than aiming to improve the wellbeing of the majority. As Lansley puts it, ‘the experiment in free markets and hyper-individualism, twin tested to destruction over the past four decades, has been an exercise in national self-harm’.
Looking at other countries would help. The decline in the wage share in the UK is particularly high by international standards, and is affecting even relatively high earners such as doctors, lawyers, academics and accountants. Financialisation and a reduction in the bargaining power of labour are key to understanding that. Successive British governments have allowed enormous profits to be made, often through asset price inflation. Housing is a particularly salient example of this, as is the prioritisation of shareholder dividends over wages and investment. Nowhere has this been more evident than in the energy sector. Global wholesale gas prices have been falling but households in the UK will continue to face crippling energy costs for the foreseeable future and yet there was nothing in the budget announcing reform of the financial sector and corporate ownership.
Nurses, doctors, teachers, emergency services, train drivers, barristers, academics and civil servants, with the help of unions, have started to raise awareness of how unequally structured our economy is: of the relationship between wage depression, weak employment rights, real-term pay cuts, the high cost of living and crises in our public services. The question is, will the higher earners among us follow suit, or will they continue to think they’ll be protected forever?
Marcos González Hernando is Honorary Research Fellow at the UCL Social Research Institute, Postdoctoral Researcher at Universidad Diego Portales and Adjunct Researcher at the Centre for the Study of Conflict and Social Cohesion (COES).
Gerry Mitchell is a British social policy researcher, most recently having worked for EVOC (Edinburgh) Friedrich Ebert Stiftung Nordic (Stockholm), Compass (London) and TASC (Dublin).
Uncomfortably Off by Marcos González Hernando and Gerry Mitchell is available on the Bristol University Press website. Pre -order here for £19.99.
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