Soon enough, there will be figures which reflect the gap between Labour and the coalition in their approaches to meting out pain
George Osborne stood up in the splendour of the City’s Mansion House on Thursday night and affirmed that we are beset by a ravaging financial storm. The country no longer needs a black-tied chancellor to issue gale warnings: hatches are already being battened down in everyday life. With work insecure, pay packets lightening and pension plans shattering, the storm is upon us all right. The real test for any society is how it arranges the shelter.
New data on family incomes, crunched by the Institute for Fiscal Studies, confirms how the crisis has poured off the pink pages and onto the kitchen tables where bills stack up. During 2010-11 – the last financial year where Labour wrote the rules – incomes plunged by an average of 3% plus, the biggest drop since the first Thatcher slump of 1981. The sharing of the pain, however, is different this time. In the Rubik’s cube recession the rich got richer while the rest got poorer, but during the Gordon Brown bust most of the burden really was shunted on to broader shoulders. Right over the range, higher incomes dropped back further. The figures for the seriously rich are clouded by tax-dodging strategies, but for the wider population this is powerful evidence that – until recently – there was some substance to claims of us all being in it together.
The new data also provides the final word on how 13 Labour years cashed-in for wallets and purses across society. What’s depressing, and already familiar, is how the super-rich soared while the earnings and benefits of the poor and middling stagnated. What is less appreciated is just how much kinder a country Britain became for young and the old. While the vicissitudes of the economic cycle can distort particular poverty measures, if we take the good and the bad times together, we can see that vast strides were made in tackling want. The great goal of halving child poverty was not quite met – largely, the IFS suggested, owing to a lack of focus in Tony Blair’s final years – but Mr Brown’s brief tenure in charge did enough to secure an overall reduction of one third. If he had set himself the same stretching targets for the elderly, he would have succeeded. The pension credit was derided by the savings industry and money-page moralists because it targeted the cash-strapped over the thrifty. It turns out to have done as much to break the link between ageing and hardship as almost anything else tried in the long line of schemes since the Tudor poor laws.
New Labour’s ruthless focus on children and pensioners left many others cold, especially the young unemployed adults who are enduring such misery now. But in a world where it is commonplace to bemoan impotent nation states, the data is a reminder of the tremendous importance of the choices that governments make. Maybe not quite by next year, but soon enough, there will be figures which reflect the coalition’s different approach to meting out pain. The omens are dire. Savage tax-credit cuts will compound frozen pay. Ill-targeted personal allowances will provide a little relief for those with full-time jobs, but do nothing at all for the unemployed or for most of those 1.4 million who are working part-time because full-time jobs are not there to be had. A dose of tough medicine is of course unavoidable, but how much bitterer it will be when George Osborne’s cut to top tax is providing largesse for the elite.
Resentment is rising. This is a week in which well-heeled shareholders rounded on Sir Martin Sorrell over his outsize pay. The last seven days also saw one of those Premier League deals which extort cash from the mass of people who want to watch football in order to stuff the bulging pockets of stars and corporate fixers. It saw, too, the revelation that one Murdoch executive described herself as being “in it together” with the PM. Whether or not that dictum holds in Chipping Norton, it held up reasonably well during the recession’s first dip. It is not doing so in the second.
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