Posts Tagged ‘austerity’

British children living in poverty ‘could hit record high’ – report

By 2023-24, the proportion of children living in relative poverty is on course to hit 37%

The proportion of children in Britain living in poverty risks hitting a record high in the next few years as incomes stagnate and benefit cuts continue to bite, a report has warned.

A study by the Resolution Foundation thinktank said UK households had experienced flatlining living standards due to a lack of economic and pay growth in the past two years. Average incomes will not rise materially over the next two years either, it said.

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Why has Corbyn remained so ambivalent about Brexit?

Having sat on the fence for so long, Jeremy Corbyn must be feeling uncomfortable. Unless he moves swiftly to shift the impasse at Westminster he will be consigned to political irrelevance, writes Graham Room (University of Bath).   

Why has Corbyn remained so ambivalent in this Brexit saga?  He has a long history of Euroscepticism, rooted in the view that the EU is a neo-liberal project of global corporations.  In addition, however, he wants, as Labour Prime Minister in waiting, to be free from EU regulations that might constrain him in rebuilding public institutions in this country, from the health and welfare services to local industrial strategies and community revitalisation.

The rhetoric of the Brexiteers contrasts ‘us’ and ‘them’ – the freedom-loving Brits versus the rigid and punitive Europeans. Corbyn similarly risks contrasting the green and pleasant land, which his policies will foster, and the hostile neo-liberal environment from which Brexit will free them. He is also, of course, sensitive to the pleas of those Labour MPs who represent Leave constituencies and who are understandably wary of the accusation that Labour might ‘steal’ their referendum victory. In many ways, therefore, his position is as unenviable as that of Theresa May – a Remainer, but tasked with holding together a party torn between the hard Euroscepticism of its membership and the much softer Parliamentary party.

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There are three tasks that Corbyn faces, if he is to resolve this set of interlocking dilemmas, with advantage for his party, the communities they represent and the country – and indeed, for his own place in history.

  1. He should first recognise that the EU cannot be reasonably described as a neo-liberal project of global corporations. Those corporations have indeed accumulated a position of considerable power, shaping the EU’s rule-based systems of economic governance, but this is a continuously contested terrain. The labour movement of the last 150 years developed precisely to engage in that contest, at national and international levels.  To imagine that the sort of democratic socialism Corbyn espouses can be built in one country, even one separated from its neighbours by the sea, goes against all that experience.
  2. Communities across the UK have suffered from the financial crisis of 2008 and the austerity that followed. Here lies much of the sentiment that was skilfully mobilised by the Leave campaign, as hostility to Brussels and the EU.  Disempowered and with little hope, working-class communities across England’s traditional industrial heartland seized on the promise of ‘taking back control’ and resisting the influx of outsiders.  This was not however unique to the UK.  Across Europe, austerity produced similar sentiments of disenchantment and populist revolt. Now if ever, there is surely an opportunity to re-affirm the social democratic promise of social solidarity and economic justice.  As yet, however, social democratic parties have found themselves on the defensive, nowhere more than in Germany, the heartland of the European project. The debates around immigration and refugees have swamped critical discussion of the destructive effects of austerity.

In the UK Corbyn did succeed, in the 2017 General Election, in generating a public debate around alternatives to austerity, sufficient to deny the Conservatives a majority.  His second task is thus to frame a similar reform project that goes beyond these shores and offers hope to communities across Europe.  It means articulating a vision for the reform of EU social and economic governance, which can enable the citizenry to ‘take back control‘.   It means an alliance with other progressive parties who share that vision.

These reforms might involve four elements:

  • Rejuvenate the European economy, with public investment and a positive industrial strategy for all regions, revitalising local communities;
  • Promote security and creativity for all citizens, through strong welfare systems and investment in skills;
  • Re-think free movement, by reference to communities that are losing their population, because of economic desertification, and others facing large influxes of newcomers, without the infrastructures they need;
  • Empower local and national communities to work together across national boundaries, forging their own scenarios of development, with real political choices and trade-offs.
  1. Corbyn’s third task is to take such a message to communities across the UK, particularly those that voted Leave in the referendum. He has been assiduous in countering their readiness to blame their woes on immigrants; he must be equally assiduous in confronting their hostility to the EU.  Both of these scapegoats were skilfully demonised by the Brexiteers; both tactics must now be exposed as false.

So must the claim that even a no-deal Brexit would involve only minor and temporary difficulties, which resilient Brits will cope with, just as heroically as they did the Blitz.  The disruption of any sort of Brexit will be substantial and will hit these Leave communities particularly hard.

Corbyn will need to show how the EU reform programme sketched above can benefit communities across the UK.  Labour MPs from communities that voted Leave have been tempting Theresa May with offers of their support, in return for investment packages for their areas.  Packages of this sort would be central to the EU-wide reforms suggested above – but as a system-wide transformation, not just a short-term political fix for a Prime Minister in need of a few votes.

In conclusion, therefore: Corbyn has been widely criticised and ridiculed for the stance he has taken in the Brexit process and the tragicomedy unfolding at Westminster.   It is, however, arguable that he is the one person who might snatch a positive outcome from the present impasse – for the Labour Party and the country, but also indeed for the EU as a whole.

Cometh the hour, cometh the man.  Maybe.

This article gives the views of the author, and not the position of LSE Brexit, nor of the London School of Economics.

Graham Room is Professor of European Social Policy at the Department of Social and Policy Sciences, University of Bath.

Hammond £5bn short of ‘austerity is ending’ target, says thinktank

Institute for Fiscal Studies figures are blow to chancellor’s attempt to keep his promise

Philip Hammond must find an extra £5bn in this year’s Whitehall spending review to reverse planned cuts and meet his claim of ending austerity, a leading thinktank has revealed.

The Institute for Fiscal Studies told the chancellor that funds pledged in last year’s budget to boost NHS spending, defence and international aid failed to safeguard local councils and some of the worst-hit government departments from further shortfalls.

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Low income households under austerity: a notable rise in debt for essential needs

Looking at low income household indebtedness in austerity Britain, Hulya Dagdeviren and Jiayi Balasuriya find that the poorest households have experienced the greatest growth in unsecured debt to income ratio. More importantly, unlike the pre-crisis period when debt reflected a desire ‘to keep-up with the Joneses’, in recent years there has been a rise in debt for essential needs such as rent, food and utilities.

Unsustainable household debt was a major source of instability during the 2008 crisis. A decade after the crisis, one would expect a substantial deleveraging to take place across the economy. This is far from reality in Britain. In 2017, outstanding consumer credit was over £200 billion according to figures from the Bank of England. Longitudinal surveys revealed that while the proportion of households with financial liabilities (excluding mortgages and student loans) declined slightly in recent years and in comparison to the pre-crisis period, average household debt increased by around 43% (see Table 1). It is in fact more common for the unemployed and sick/disabled to be net debtor than employed and retired populations. Unlike the pre-crisis period when low income household debt reflected aspirations for home ownership, under austerity, debt or arrears for essential needs such as rent, food, energy and water account for a significant proportion of low income household indebtedness.

Indebtedness among low income households worsened 

In our recent research we analysed a large and representative sample of UK society extracted from the UK Household Longitudinal Study and its predecessor, the British Household Panel Survey. These surveys, sampled before and after the financial crisis, collected information on debt in 2005-6 and 2012-3 from a total of more than 62,000 respondents and revealed the financial strain of the poorest households.

Compared to wealthier counterparts, low income households have had higher debt to income ratios over the past decade. On average 31% of the respondents reported having unsecured debt. While the unsecured debt of a typical individual in the top 10% income group has always been less than their monthly income, the debt-to-income ratio for the poorest 10% of the population grew from 140% in 2005-6 to 190% in 2012-2013, representing the largest growth in the degree of indebtedness in comparison to other income groups, a few years after austerity programme first rolled out. The proportion of individuals holding debt in the lower income groups also increased after the crisis as opposed to the contraction in the corresponding indicator for most above the average income groups.

Rising demand for debt advice corroborates the intensifying debt pressures amongst low income households. For example, the number of people who received debt advice from StepChange (a leading debt management charity, assisting mostly low income clients) increased six fold within a decade, rising from around 50,000 to 300,000 people between 2006 and 2016. In 2016, the charity was contacted by a record number of nearly 600,000 people for help, together with 3.3 million visits to its website.

Debt and economic activity

Net financial wealth is an important indicator, reflecting the extent to which people are able to cushion their liabilities with their assets. Examining net financial wealth by economic activity reveals some remarkable dynamics with respect to household indebtedness in the pre- and post-crisis periods. Firstly, the proportion of employed and self-employed individuals in negative financial wealth (net debtors) has risen after the crisis. Secondly, and more importantly, those whose needs are supposed to be covered through the welfare state such as the unemployed, sick and disabled and their carers have been net debtors by greater proportion in comparison to other household categories. This was the case both before and after the crisis, reflecting the inadequacies of the welfare provision. To be precise, around 40% of unemployed and disabled population is in negative financial wealth.

 

Debt for essential necessities

An important element of low-income household indebtedness has been arising from difficulties with essential payments rather than the aspiration of households to accumulate assets or to keep up with their wealthier peers. This is reflected by UKHLS data on self-reported difficulties for paying rent or household utility bills. In 2012–13, several years after the austerity measures first rolled out, a greater proportion of the poorest households in the lowest 10% income category had arrears of essential bills. Over a fifth of the UKHLS respondents in that category found it hard to keep up with their housing payments, and around 18% were behind with payments for essential household bills. The rising debt for essential household spending is also confirmed by Citizens Advice and National Audit Office that provided a minimum estimate of £18 billion in personal debt owed to government, utility companies, landlords and housing associations.

The evidence from our research shows that while growth of household indebtedness prior to the crisis may have reflected a desire to accumulate wealth or maintain socially acceptable lifestyles, a different phase of indebtedness has emerged under austerity. The evidence from surveys, debt advice organisations, and interview data shows that low income households have been incurring debt for basic necessities and key services. This underpins the fact that debt is not always accrued from financial providers but also from non-financial companies providing services like water and energy, or local authorities providing social housing.

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Note: the above draws on the authors’ published work (with Sheila Luz, Ali Malik, and Haider Shah) in New Political Economy.

About the Authors

Hulya Dagdeviren is Professor of Economic Development at University of Hertfordshire.

Jiayi Balasuriya is Senior Lecturer in Finance at Hertfordshire Business School

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay (Public Domain).

 

 

 

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