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If everything’s going so well George, why don’t we feel any better off?

cost-of-livingAccording to George Osborne, there is no cost of living crisis.  For the millionaire ex-public schoolboys around the cabinet table, with their friends in Notting Hill and the Square Mile, this is no doubt true. But millions of people across Britain know from experience that it’s been harder to make ends meet following the financial crash and the onset of austerity.

Take the low-paid public sector workers civil service union PCS, for example. In his foreword to my new book The Cost of Living Crisis: Time to End Economic Injustice, General Secretary Mark Serwotka points out that some of his members “are up to 20% worse off in real terms due to the combined impacts of pay freezes, pay caps and increased pension contributions”.

The book itself is based on research originally commissioned for the Trade Union Coordinating Group (nine trade unions including PCS, FBU, and RMT only one of which, BFAWU [the Bakers Union], are Labour affiliates), who asked me to survey and analyse what has happened to incomes and everyday living costs since the financial crisis of 2008 and the onset of austerity. The result is a comprehensive picture of the reality of life in austerity Britain.

The financial crash, and the form of the “recovery” which succeeded it, were both shaped by a thirty-year experiment in neoliberalism, pursued by Tories and New Labour governments alike, determined to smash the strength of the trade unions and empower capital, undermining public provision of services via privatisation and outsourcing. The result? A casualised Labour market characterised by low paid, temporary and zero-hours jobs, with workers stripped of their rights via bogus forms of self-employment, whilst more and more “jobs” go to unpaid interns, “workfare” placements or volunteers.

The consequence?  In 2008 the median wage in the UK was £23,800.  Five years later it had fallen to just £21,900, a drop of 7.8%.  In real terms, the squeeze hit even harder.  This was an unprecedented collapse in the value of our paypackets, and the longest sustained fall on record.

People have been left feeling stretched to the limit, and beyond. So many families struggling to  keeping their heads just above water on a month-by-month basis, but it only takes a shock – a rise in the rent, a family member falling ill, a vet’s bill, the car failing it’s MOT – and thing’s start to go wrong. Debt just rolls on from one week to the next, accruing interest much to the delight of exploitative payday lenders.

And despite the cruel tabloid rhetoric about “benefit scroungers”, the reality is that a sizeable chunk of the welfare bill was going to people in work, as employers paying poverty wages were subsidised via tax credits and housing benefit.  If all employers paid their workers a living wage, the welfare budget would fall by at least £6bn.

Meanwhile the whole panoply of attacks on the poorest in society came at a furious pace – via sanctions which left people in utter destitution; “workfare” programmes were people were coerced into working unpaid for highly profitable companies (a modern form of slavery); the punitive bedroom tax ripping up security of tenure for people in social housing and punishing them for failing to move into smaller properties where none where available; the callous Work Capability Assessments under which terminally ill people were found fit for work; the Benefits Cap where a whole population of poorer residents faced being socially cleansed from the city they called home. The list of people driven to suicide by this horror grows tragically by the day.

More galling still in this none of this was necessary. Addressing the budget deficit was only a convenient excuse for an ideologically motivated attack on public services and the concept of the welfare state. Even from the point of view of the capitalist system’s defender’s, many macroeconomists by no means shared the view that cuts to public sepnding out to be prioritised – what about growth? Or productivity? Or aggregate demand?

These austerity policies even failed on their own terms, as Cameron’s much vaunted promise to eliminate the deficit had to be shelved, as recovery was postponed, growth subdued, and tax receipts diminished via policies which sucked demand out of the economy, by enriching those more inclined to stash the proceeds in offshore tax havens instead of those who would spend if only they had the means. To the extent that the we are now experiencing “recovery” it is fuelled by an unparalleled levels of consumer debt and a house price bubble.

The book describes a deliberate political choice to pursue these aggressive attacks on public services and welfare spending – in order to move from a model where services are provided as of right to all, to a model where services are commodities for which those who can afford it can choose to pay. As the state is forced to retreat from whole areas of provision, private companies are only too ready to step in and profit from providing them at a price. It is a strategy for improving the return on capital of shareholders and speculators.   And it stinks.

So where do we go from here? At the heart of my analysis lies a recognition of the massive unresolved conflict at the heart of Labour policy making currently. Ed Miliband has been correct to diagnose a crisis in living standards, as people simply don’t feel that rosy economic picture Osborne has painted is translating in improvements to their own finances. How far a future Labour government is able to alleviate or address the roots causes of the cost of living crisis is a useful metric in evaluating their progress.

Miliband is to be congratulated for making this such a prominent theme of political debate. Some Labour policies offer small but significant steps in the right direction, from scrapping the bedroom tax to addressing the dysfunctional energy market and lowering tuition fees, there is the basis for widening and extending this agenda in government.

However, of course any ability to make a significant impact on standards of living will be constrained if not eliminated entirely by making deficit reduction the partys number one priority and sticking to Tory spending limits through until 2017.  This will inevitably mean futher cuts (eg to local government services, which have already been eviscerated since 2010), and lead to more privatisation and outsourcing. Nor, of course, will the living standards of public sector workers be improved by maintaining the pay freeze despite the rising costs of everyday expenditure like energy and transport costs (with profit-hungry private providers pushing for further increases).

Labour could do so much better than this. Each chapter of my book concludes with ambitious but feasible policy alternatives which any government that genuinely prioritised such actions could pursue, were it to abandon the straight-jacket of austerity:

  • increasing the National Minimum Wage to £10 an hour;
  • ending ability of workers to exploit people on zero hours contracts;
  • repealing the Tory anti-trade union legislation;
  • launching a mass programme of council house building;
  • taking utilities like rail, energy and mobile/internet services under public ownership to be run for need rather than profit;
  • ending the punitive culture of sanctions, workfare, and Work Capability Assessments, and exploring the feasibility of introducing a basic citizens incomes.

Together such measures would provide a basis for Labour to be swept to power on the promise of delivering an ambitious but entirely possible alternative. This really would address the Cost of Living Crisis that Miliband is right to speak of, and would fulfil a pledge first made by a Labour manifesto over 40 years ago now: to “bring about a fundamental and irreversible shift in the balance of power and wealth in favour of working class people and their families”.

The Cost of Living Crisis:  Time to End Economic Injustice by Michael Calderbank is the latest release from Comerford and Miller, and follows last year’s The Failed Experiment by Andrew Fisher.  Both books are available from     

Michael Calderbank is Secretary of Brent Central CLP and serves on the editorial board of Labour Briefing magazine

One Comment

  1. John.P reid says:

    But we said that in 1979, after trying toget the economy back on track following Ted heaths mis management,we got the economy back on track then,but people didn’t feel better off despite the public5% pay rise,and we lost,
    Trouble is Cameron and Osbourne will say it would have been worse under us,as there are defecit deniers on the left

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