Mr Brightside: Left Behind, Inequality, and Why it Matters 

 

“’Cause when you’re laid in bed at night 

Watching roaches climb the wall 

If you called your dad he could stop it all, yeah” 

 

Before we get into the depressing reality, some light-hearted relief courtesy of PM Starmer and former PM Johnson

 
On Monday there was a party political broadcast by Reform. The usual populist schtick, this is wrong, that’s wrong, we’d change everything, with the important “how” omitted. 

However, in the opening critique of our new government, I was amused to hear the PM referred to as “free gear Kier”. Harsh, maybe, deserved, probably. 

Not to be outdone, Boris Johnson, was quoted as saying; “he former MP said: “I want you to know, I have no donors paying for my suits. Or spectacles. Who pays for your spectacles? You pay for your spectacles, don’t you? It’s unbelievable.” 

Johnson, it shouldn’t be forgotten was the PM who, amongst other numerous donations, received £23,853 from the JCB boss Anthony Bamford, towards his wedding, covering the cost of hiring a marquee, Portaloos, waiting staff, flowers, a South African barbecue and an ice-cream van. 

Bamford’s wife also donated luxury food from her business, Daylesford Organic, to the former prime minister. 
 

‘I was amused to hear the PM referred to as “free gear Kier”’

 
Then there was £122,000  from Lord Brownlow towards the refurbishment of his Downing Street flat. 

There is also the findings of Transparency International UK that highlighted over 130 PPE contracts made during Covid which could be corrupt as they were awarded to inexperienced companies with close links to the Tories.  

Within this, there was £1.4bn of PPE, acquired by the government in a single deal that has been destroyed or written off. An amount that would be sufficient to restore the pensioners winter heating allowance 

Frivolity over, now its showtime!!!!  

Firstly a definition; the terms left behind has been much in vogue post-Brexit, but, what does it really mean?   

The term is used to describe areas of the country that felt neglected by politics and politicians, the “Establishment”, and is often associated with vote “Leave.” 

Beyond the establishment there are underlying economic factors such as, low levels of social mobility, low skills or declining industries, and underinvestment in schools, housing, the NHS, public transport, and jobs 
 

‘What had left them behind was progressive politics; immigration, the LBGT+ movement and climate change, which they blamed on the trendy establishment’

 
The economic part of being left behind was traditionally the definition that was accepted, with the drivers being the GFC and Osborne / Cameron’s austerity. However, when you looked at many Brexit voters, and then the red wall that turned blue in 2019, there was clearly other factors at play. 

The red wall was largely comprised of areas that had been victims of Thatcher’s free-market deindustrialisation. Younger people had moved away in search of work, leaving older, often retired people. Many of them were well off, fully superannuated, homeowners who had seen a substantial rise in their property related wealth. 

What had left them behind was progressive politics; immigration, the LBGT+ movement and climate change, which they blamed on the trendy establishment. The so-called “culture wars”. 

The real issue is income and wealth inequality. Put simply, this means that the majority of the wealth is held by the few. 

The traditional measure for income inequality is The Gini coefficient, which summarises income inequality into a single number between 0 and 100%, where a higher percentage means more unequal.  

In the UK, The Gini coefficient was 35% before housing costs and 39% after housing costs in 2022/23. 

As the graph below shows, income inequality, which has fallen post-WW2, started to increase in the 90s as the effect of deindustrialisation started to gain a foothold.  

Within this there are additional regional, ethnic and health based inequalities: 
 

• The West Midlands (£553) had the lowest median income before housing costs in 2020/21 to 2022/23, while London (£735) had the highest.  
• Households from a Bangladeshi ethnic group (£416) had the lowest median incomes before housing costs while households from an Indian ethnic group (£700) had the highest.  
• Families with a disabled member had a median income of £549 before housing costs during this period, compared to £682 for households where nobody was disabled 

 
OECD figures show the UK has one of the highest levels of income inequality in the EU, although we are marginally better than the US. 

Source: https://commonslibrary.parliament.uk/research-briefings/cbp-7484/ 

Part of the issue with wealth inequality is that it is not seen as a social problem in the way that poverty is. 

Perhaps, this can be explained by the fact that poverty is more visible, therefore we are more aware of it, whereas we rarely see the extremes of economic inequality in our daily lives. This “frames” our view of the subject as we are only aware of it through being told. In the context of wealth inequality, then, frames are fundamental to the building or dissipating of political pressure for change. 

“Frames, “Framing” works to “shape and alter… interpretations and preferences’ by ‘activating schemas that encourage target audiences to think, feel, and decide in a particular way.” 
 

‘Wealth inequality can be likened to an iceberg; whilst mostly invisible, it sustains an already deeply unequal society’

 
Wealth inequality can be likened to an iceberg; whilst mostly invisible, it sustains an already deeply unequal society, amplifying ‘categorical’ inequalities (race, sex, class) and regional inequalities, and it raises risk levels (health, environmental, financial) for those least able to bear the strain, and least able to ‘capture’ sufficient political power to shift the scales in their favour. 

Wealth inequality has a wider impact that we imagine, bringing together many of our current defining challenges: climate, social cohesion, trust in government, institutions, and democracy. For example, wealth equalisation can be a pathway to deliver racial and gender justice, or to mitigate climate damage. 

Not only does, wealth inequality drive poverty for the people at the bottom and exacerbates the differences between groups (gender, or different ethnic and racial groups), it also distorts democratic and political cultures. Rich people can buy the means (directly or through forms of influence) to ensure that their wealth is protected/allowed to accumulate, which produces a vicious cycle, an inequality trap.  

Wealth inequality drives poverty and precarity for people at the bottom, and exacerbates disparity 
 
Wealth inequality is become more prevalent than income inequality
 

• In the UK, the bottom 50% of the population owned less than 5% of wealth in 2021, and the top 10%, 57% (up from 52.5% in 1995). The top 1% alone held 23%.  
• The ratio of wealth to income has risen in the UK from 2.3 to 1 in 1948, to 5.7 to 1 in 2020. 

 
Wealth inequality has a significant impact on life chances and outcomes. It generates high levels of poverty amongst those with no wealth assets to fall back on. There are no nations which have high levels of economic inequality and low levels of poverty. 
 
The UK is a rich nation, and a very unequal one
 

• >25% of adults said that they would not be able to manage on their savings for a month if their income stopped.  

• The average family in the poorest 10% of families has negative net wealth.  

• The bottom 2% have just £2,500 (including household physical assets). At least half of the bottom 10% only held wealth in physical assets of £8,000. 

 
As with income inequality there are also significant ethnic and regional differences, although those worse off tend to be the same.  

Asset inflation, including property, has increased absolute wealth levels so that even relatively stable ratios lead to increased ‘gaps’ and decreased social mobility, and asset inflation itself represents an increase in the role of ‘unearned’ vs earned wealth. 
 

‘Inequality breeds poverty’

 
Consumption patterns of the wealthy elite increase environmental risk for the poorest. For example, they are much more likely to be responsible for the carbon-producing behaviours that increase these risks.  

Source: https://www.jrf.org.uk/narrative-change/changing-the-narrative-on-wealth-inequality 

Inequality breeds poverty.   

A report by the charity Trussell found that >9m people in the UK experience levels of poverty and hunger so extreme they are vulnerable to reliance on charity food handouts. 

In addition, there are 1m more people in what the report defined as “hunger and hardship” – living on income at least 25% below the relative poverty line – than 5-years ago, and nearly 3m more than there were 20-yrs ago. 

Children were at high risk of facing hunger and hardship, with 20% falling into this category. A third of larger families – those with 3+children – were also at high risk of dependency on charity food. 

58% of people facing hunger and hardship were in a household where at least one person is working. Almost 40% in households claiming universal credit were in hunger and hardship. 
 

‘58% of people facing hunger and hardship were in a household where at least one person is working’

 
Equally worryingly, the report suggested that Labour would fail to deliver its manifesto promise to remove the “moral scar” of food banks unless it tackled low household incomes in this group, which amounted to one in seven of the population. 

It is expected that in the short term Chancellor Reeves will not abolish the two-child limit. The Treasury believes the £3bn cost of abolishing it is now unaffordable given the competing demands for investment across public services. 

Trussell says fixing the UK’s benefits system is vital to cut food bank use and, as a start, has called on ministers to protect the incomes of 2.2m people whose universal credit income is reduced by monthly deductions for historic loans and debts, and a further 120,000 households hit by the benefit cap. 

Part of our problem is that we behave like a poor country, “we can’t afford it”. The truth is that we can if we want to. 

In 1945 the war had all but bankrupted us. Worse still we had to transition an economy for wartime to peace. Industry had to retool, and the workforce had to absorb hundreds of  thousands of service personnel. 

Rather than repeating the mistakes of post-WW1 where there was austerity which lead to general strike, mass unemployment, and the potential rise of fascism, the Labour government led by Clement Atlee found the money to create the welfare state, and to build hundreds of  thousands of houses. 

They did it the Keynesian way, the borrowed and built infrastructure which lead to growth for all. 

This week it was revealed that the chancellor wants to change how the Treasury accounted for capital spending to reflect its benefits by using an alternative debt metric to the one used in the rule she inherited from her Conservative predecessor. 
 

‘Inequality and feeling left out have played a part in the rise of the far right post the GFC’

 
The move, which will be confirmed to the Office for Budget Responsibility (OBR), will allow the government to borrow tens of billions more for capital spending over the course of this parliament. 

One option is to change the debt measurement to account for the value of the assets the government holds, such as roads, schools and hospitals. Measuring the net worth or the net financial liabilities held by the government could give the chancellor room to borrow as much as £50bn more than currently planned. 

Another, less radical option, would be to keep the debt rule in place but excluding losses from the Bank of England from the debt calculation, as well as any extra borrowing used to set up public institutions such as the national wealth fund. This would free up a more modest amount of between £10bn and £20bn. 

Inequality and feeling left out have played a part in the rise of the far right post the GFC. 

Since the crash, social provision and living standards have come under increasing pressure. Traditional social democratic parties were complicit, and the far-right exploited this, presenting immigration as the catch-all explanation for growing social and economic insecurity. Other crises, such as the pandemic and Russia’s invasion of Ukraine, have deepened social turmoil: absolute poverty in Austria, for example, jumped by 50% last year. 

The far rights rhetoric of the “decline of the west”, blames immigration, Islam, multiculturalism, the assault on “traditional values”, and the reckoning with historical injustices, which they believe defame the west.  

The truth is simpler; the rise of the far-right is both a symptom and cause of western decline. The rolling back of social rights, economic stagnation, the convenient scapegoating of migrants by politicians keen to deflect responsibility, allied to the mediocrity of the current crop of western leaders creates a vacuum ready to be filled by snake-oil salesman. 
 

“Minimum wage got my adrenaline caged 

Full of venom and rage, ‘specially when I’m engaged 

And my daughter’s down to her last diaper, it’s got my ass hyper” 

 
 

‘Today we ask the question why inequality matters. Although, the simple fact I feel the question needs to be asked sums-up the sheer nature of the problem.

This will be part of a follow-up article next week, where we consider the politics of the 1930s, the rise of fascism and the similarities between now and then.

Inequality was falling in both the UK and US prior to the free-market shtick of Thatcher and Reagan. In the UK, both main parties seem to still be dazzled by their ideas, some more than others. The facts speak for themselves, if capitalism is meant to serve the people, the current, post-1980 iteration has failed.

Which brings me onto the Mad Hatters Tea Party, or, as it more commonly known, the Conservative party. In the very first article, “Brexit: The Never Ending Story”, this column speculated about the future of the party. Yesterday it was made clear. It doesn’t have one!

If the purpose of the prolonged choice of leader was to consider, assimilate, and process what caused July’s disastrous election defeat, and identify a candidate who can steer the party to recovery, it was time wasted. Instead, it became an exercise in denial and repetition of the same, tired, out-of-date dogma.

After all their supposed soul searching to have narrowed the field down to Kemi Badenoch and Robert Jenrick shows they have learnt nothing. Both are from the hard-right, separated only by who is more stupid!

Of yesterday’s remaining three, it was James Cleverly who appeared to understand what was required to re-engage with the electorate, when urged his party to “be more normal”. The election result was a clear repudiation of everything the party had become as it veered to the right.

Badenoch was a Brexiter, but as trade secretary she abandoned an unworkable deadline that would have created a regulatory vacuum as reams of European regulation simply expired. She has been comparatively restrained when it comes to demands that Britain quit the European court of human rights (ECHR), swerving the proposal as an “easy answer to a complex question”. She is, however, a  divisive culture-warrior  on matters of gender, race and history, with a hostile attitude towards the media. On the economy, she is convinced that growth, innovation and productivity are suffocated by the rise of something called “the bureaucratic class”.

Jenrick, by contrast, appears to be an opportunist, who feels his chance to become leader best is to join the hard-right. He was a Cameron devotee, a remain supporter in 2016, now he has made leaving the ECHR a centrepiece of his campaign, telling anyone who will listen that for Britain it is “leave or die”. For him the answer is immigration what’s the question? He is no more than a Farage/Reform tribute act but a decaf version rather than the real espresso.

Now we have the wholly unrepresentative party membership to decide who wins.

The winner will be the loser! The real winners are the other parties. Labour will fancy a second term, the LibDems will be salivating over what is left of the blue wall, and Farage, well………that’s for next time!

Lyrically, we start with Pulp and “Common People” which deals rather satirically with inequality. We finish with one of the great songs, perhaps rap is more accurate, about poverty with “Rock Bottom” by Eminem.

Enjoy!

Philip.

 
@coldwarsteve
 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

Click on the link to see all Brexit Bulletins: