On Tuesday 10 May, Helen delivered a speech on inequality at the London School of Economics.
A response to Mike Savage’s Social Class in the 21st Century
Why this study matters
I am very pleased to be given this opportunity as a practising politician to give a response to Social Class in the 21st Century. I found this an immensely refreshing read and I believe it is an important document. First it tells us about how our country – Britain – is changing.
And secondly by looking at the different assets and resources people have – economic, cultural and social capital – it demonstrates the multi-dimensional nature of class today. By analysing the different strands we can see much more clearly both the processes which are producing inequality and what needs to be addressed if we are to tackle these issues effectively.
A commitment to equality is central to the Left, whether because we believe, as the Declaration of Independence says, that it is self-evident that all men are created equal, of whether as Tawney says “The essence of all morality is this: to believe that every human being is of infinite importance.”
But in a world where the 1% own as much as the 99% and a country where the wealthiest 10% of households own 45% of the wealth, and the least wealthy half of households own only 9% - it’s clear we are failing.
These problems are being intensified by a decade of Tory government – 2 million people using foodbanks and three quarters of a million paying the Bedroom Tax, while £1 million houses can be inherited tax free.
But we need to acknowledge that the problems have been longer in the making and simply reversing “Tory cuts” won’t do the trick.
Britain was at its most equal in 1976, yet this is not seen as a high point in our national life – preceding as it did the call to the IMF and the winter of discontent.
But for far too long we have been trapped in the mind-set of the response to that crisis, the libertarian philosophy underpinning the Thatcher/Reagan era – which didn’t just re-shape our institutions, but also took hold of the popular imagination of what is possible, natural and necessary in public policy.
The GBCS opens up the possibility of a new approach and highlights the issues we need to address to set out a new agenda for a progressive government of the left.
It shows that to make change we need to keep our eyes firmly on the outcomes – the shape of society we want to see – and not be limited by the belief that only what can be delivered by market mechanisms is sustainable, deliverable and credible.
The following findings seem to me particularly striking:
The emergence of a new elite – the 6% - with high levels of every type of capital is pulling away from the rest of society. It is more closed than for several generations and the children of this group will continue to have privileged access to wealth and influence
And at the other end of the scale a precariat– a huge group of about 15% or 9 million people – facing low pay, insecure and fluctuating work, with no capital or other stake in society
Furthermore former distinctions between the middle and working classes are disintegrating with the emergence of five new groups.
Britain is much more unequal than it was 30 years ago. This can be difficult to believe sometimes, partly because Tory Ministers rely on relative income poverty statistics between 2010 and 2014 (which in any case are forecast to move into reverse) but also because the cultural norm is demotic. The GCBS shows how everyone wants and sometimes even believes themselves to be “in the middle”. Popular tastes are fashionable and “designer jeans” are not an oxymoron.
As the Resolution Foundation has shown, income inequality grew massively in the 1980s and has fluctuated around the same level for some time with the top 10% earning 4 times the bottom 10%. But the strength of the Great British Class Survey is that it looks also at the role of capital and housing in class stratification.
So today many, even well educated, young people are excluded from financial security and a place in the middle class. In the group classified as new service workers members of ethnic minorities are disproportionately represented. To understand what is going on and be realistic about how to change things it is vital that we learn a wall of money now separates the classes more steeply than before which it is almost impossible to scale. Emergent service workers and the precariat together comprise over a third of the population and I believe this goes a long way to explaining growing dissatisfaction with politics as usual and alienation from the system.
Inequalities in capital exacerbate the geographical division of the country. So there is now a huge barrier to people moving from the regions to the capital or the south east.
Today, culture is a carrier of class. The Royal Opera House seems to perform a similar function in 21st century Britain as the court did in the 18th.
A fantasy has grown up that we can have more equality of opportunity, without having more equality. The Great British Class Survey shows why this is a fantasy. The role of inheritance today is emphasized by the finding that 25% of new mortgages benefit from £5bn of parental contribution.
So education is no longer the key engine of social mobility.
I think the most radicalizing table in the entire book is the one which shows that a person with the same professional position, skills and education will earn between £10,000 and £20,000 less than their peers if their father was a manual worker!
The mantra of the 1997 Labour government “Education, education, education” does not work. I wish it did. But it doesn’t, because it alone cannot tackle the accumulation of other valuable assets and indeed economic, social and cultural capital facilitate access to the best education institutions.
As the GBCS says: “intense educational competition reinforces a strong pecking order between universities, in which it is the elite institutions which play a vital role in permitting access to the most advantaged positions.”
Russell Group assessment and entry criteria are to have the best and brightest, yet they do not cast their nets wide enough. Their student base is consistently recruited from higher status backgrounds, and in turn their graduates are more likely to be ‘elite’.
Who the elite are matters to all of us because they do have more power and influence so their values and life experience matter. It’s dispiriting that the privately educated are 10 times over-represented in the judiciary.
So the political task – the agenda – is to build up and distribute more equally each category of capital asset: economic, cultural and social.
Let’s start with economic capital.
A good job – one which is secure, pays well and uses the individual’s talents and develops their potential over time; one where they feel what are doing is worthwhile, is the most valuable asset a person can have.
Running the economy with a view to creating good jobs is an absolute priority. I won’t today expand on the importance of industrial activism, reform of the banks, the need to encourage more long termism in business to create good jobs and for the state to invest in science, infrastructure and training, because that would be a whole series of lectures.
However, in a discussion on equality it’s worth noting that the share of national output going to wages is falling. 40% of national income goes to wages, down from c.55% in 1948, while the share of national income going to profits has risen to over 30%. So we need a legal framework which promotes better pay, conditions and equal rights at work, it is vital to have a strong trade union movement capable of enforcing those rights. As the New Economic Foundation showed, restoring union density to the levels 30 years ago could add £27bn to GDP.
Unfortunately, today many people are in a state of insecurity which is detrimental to their incomes, health, wellbeing, and family life. Three quarters of a million people on zero hour contracts are in a state of uncertainty reminiscent of the daily “call-on” of the dockworkers. Whether you get the message in a crowd outside the dock gates or in private by a text to your mobile phone, the message is the same – you are expendable. And it’s not just the bottom of the labour market where this is happening – increasingly the NHS and social care is putting medical specialists onto zero hours contracts. As a specialist consultant observed ironically to me – “I don’t see the managers on zero hour contracts.”
Without a secure income, you can’t get a mortgage or a hire purchase agreement or plan your next summer holiday and in 2013, 3.5m British children did not go on holiday.
Jobs, pay and working conditions are Labour heartland territory. It was what we were set up to tackle. The new model for the economy where “flexible labour markets” are the desiderata is not producing an economy which, as Ed Miliband said before the last election, should “work for working people”. This does not mean however that we can revert to an approach rooted in an out of date picture of the class structure.
A secure home is the second most important asset a person can have and the GBCS shows inequalities here are even greater than on the income front. Average house values in different areas (say Burnley and Chelsea) differ by an astonishing twenty times. A third of households in the private rented sector are those with children, and today half a million children live in a private rented home with a category 1 hazard like severe damp, rat infestations and risk of explosions. Meanwhile the increase in house prices in the south has reached crazy levels – the average in London is over half a million pounds. Between a quarter and a million people own two homes, while 1.2 million families are on council house waiting lists.
So what is to be done? Everyone now agrees that we need to build more – 300,000 homes each year. But timidity and bad faith have prevailed in this area because of the anxiety about admitting that we need to bring prices down as a ratio of incomes and return to the provision of social housing at scale. The market has failed and now we see politicians dipping their toes in planning and regulatory approaches.
At the last election Labour proposed to tackle speculative land banking by a ‘use it or lose it’ approach.
In London and some rural areas, tying planning permission to a commitment to house local people is under discussion, not least because of the amount of foreign money flowing into the capital, particularly from Russia and China, which inflates prices above the reach of ordinary residents and too often these properties are left empty as assets. Maybe we should follow other countries in banning real estate purchases by non-EU citizens.
Meanwhile Frank Field argues, convincingly to my mind, that a major housebuilding programme requires the training of 74,000 young bricklayers.
All these ideas need to be developed into a coherent plan.
The initial share of national income going to wages and salaries matters. But redistribution matters too. The Resolution Foundation has shown that before redistribution, the UK has a higher Gini coefficient than the US - meaning we are more unequal than the US before we redistribute.
The UK is more equal than the US because of our tax and benefits system. And Sweden is more equal than us because of their tax and benefits system.
The IFS have shown that tax and benefit changes since 2010, have hit the poorest 10% hardest - they have lost a higher proportion of their net income than even the richest 10%.
We need a renewed commitment to the welfare state. A flexi-curity model along Scandinavian lines which is more generous, but also places greater emphasis on contribution, is beginning to gain support.
And if we care about the way society is developing we should worry that since 2010 the number of children living in absolute poverty has gone up by half a million and the Resolution Foundation forecast that by 2020 the number in relative poverty will rise to 27%. I have already pointed out that the steeper the slope the harder it is move up it – equality and equality of opportunity are linked. The discussion of housing has also reminded us that inequality is not just about income. Today wealth differences are the larger problem – adversely affecting both individual life chances and national economic performance.
Housing in London and the South East comprises 40% of the wealth in Britain. Four thousand billion of our national wealth appears to be locked up in housing.
Nobel Prize winning economist Joseph Stiglitz has suggested that we introduce a land tax.
Before the last election Labour proposed a mansion tax. The hysteria this aroused amongst those opposed to it illustrates the ignorance of the critics – which GBCS usefully addresses. If a Labour Party can’t face down estate agents it might as well pack up!
The ONS reports that a quarter of the population are in ‘negative net wealth’ meaning that they have more debts than assets and 7% have less than £500. Thousands of people have no savings safety net, while the top 10% of households each have over a million.
What is absolutely clear is that we need a thorough review of the taxation of all wealth, if we are to avoid becoming an even more unequal society, alongside measures to help people to save and access financial services.
Education is vital to getting a job and for the economy to thrive as well as for individual human development and wellbeing. The international division of labour means the UK cannot and should not compete on low wage costs.
A good education is becoming more important in the knowledge economy, even though it may not change relative social positions as it did 40 years ago.
We all know that the paybacks are best in early years and we should reverse the 600 Sure Start closures. We also know that good education and good technical training are essential in the modern world. High quality apprenticeships need to be extended further and reach deeper into a wider range of sectors – such as design and care. And we need university research to give us the edge internationally.
Technological improvement and the hour glass economy mean we need to think about the shape of future jobs when we consider what people should learn. I do not accept that change is happening so fast that we can’t make intelligent choices about which areas to concentrate on.
If we want to be the people controlling the technology maths and science are very important. At the same time it’s worth considering what machines can’t do and develop soft skills, art and creativity.
Yet today we have a shortage of maths and science teachers and artistic subjects (such as art, dance and photography) have been removed from the core curriculum. This rather than governance changes in the state school system is where a left of centre government should invest.
One of the best things about the GBCS is the emphasis it places on cultural capital. I think this is important not just because people use their knowledge of highbrow culture as a social signifier, but because culture is intrinsically valuable. It is quite extraordinary that this is a country where a liking for fish and chips is inversely correlated with a trip to the theatre. I am sure we can change this. I’m sure in Italy, opera goers don’t turn their noses up at pizza.
Your colleagues Richard Layard, Daniel Fujiwara, Laura Kudrna and Paul Dolan have done a good deal of work on wellbeing. Arts and culture improve wellbeing significantly. Frequent library use has been found to be equivalent to a £1,400 pay rise! This is one reason why a new government of the left should place greater emphasis on it and in particular on widening access and opportunities. A study called Rebalancing Our Cultural Capital found that 14 times as much lottery money is spent per person in London as in the rest of the country, even though it is people in Durham who buy the most lottery tickets!
In Lincolnshire a couple of years ago, the Arts Council spent 25p per person, meanwhile in London George Osborne has just put £5m of taxpayers money into a feasibility study for a new £250m concert hall just half a mile from the Barbican!
This is really a public policy area where the wins are easy. The second access dimension is of course income. The availability of good books, plays and concerts on an affordable basis requires an effective infrastructure of national and local support. We have been successful in the past when we have built institutions like the Arts Council, BBC and Open University and we need to defend and revitalize these, of course using new technology like the excellent livestreaming from the RSC and National Theatre.
Good arts education in school can give great pleasure throughout life on an individual basis and opens up job opportunities in the creative sector. Experience overseas shows it can transform whole communities as the Venezuelan Simon Bolivar Symphony Orchestra has done.
(6) Social networks and geography
You will have noticed I haven’t said much about geography or social networks.
We can address the geographical divide and spatial equity issues through the other policies as well as directly.
First by where we invest in the key policy levers I’ve already looked at – jobs, housing, education and culture. We’ve now reached the stage where more investment in the south is producing congestion – at the same time as the north is being starved of resources. We have a shared interest in re-balancing this country. So for every £5 spent on transport in the North East, £250 is spent on Londoners. And poor northern councils like Liverpool and Newcastle face cuts of 25% while the Home Counties have seen their budgets rise.
It’s vital we get this right – handing over power without resources as in the current ‘devolution deals’ is a sham. To embed fairness permanently we need new institutional arrangements. Handing over responsibility for policies, not matched by resources, because funding decisions are centralized in the Treasury is a recipe for disaster. The regions must be at the table when the resource allocations are agreed.
In a free society social capital is the most difficult area to influence. The Sutton Trust has done good work in identifying the issue and schemes for mentoring and work experience are important. But this is not enough unless other policies contribute to extending social networks. Equal opportunities at work; mixed public and private housing developments instead of gated communities and ghettoes; schools which avoid social selection and open opportunities; universities which make a concerted effort to harness the talents of the whole nation; and cultural institutions which are open and available without high price tags – can all contribute to building social ties across class boundaries. We need a bit less snobbery from some people and a bit more confidence in others.
So – to summarise – you have shown that modern Britain is complex – we are more unequal today than for a generation. This is not just a question of income. Other assets - wealth, housing, social contacts and cultural experience – are all dividing us into a hierarchy of groups. What this means is that a left of centre government needs to expand the range of policies it pursues to create a more equal society. Jobs and redistribution matter as they did in the 1960s; education matters as it did in the 1990s. Alongside these housing, culture, and devolution need to be on the agenda. If we acknowledge that we have big problems then we need to be prepared for big solutions. I hope I’ve made a start in setting out how we might do this.
If we want a strategic approach we need to have equality as a criteria for every policy initiative. We need to ask of every idea - will it make us a more equal or less equal society?
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