Chris Bambery – Britain’s inequality crisis

The debate around Brexit has distracted from the dramtically and tragically increasing crisis of equaltiy in the United Kingdom (very welcome for those repsonsible, the Tories). Chris Bambery puts the situtation into perspective.

Chris Bambery is author and broadcaster. Co-author (with George Kerevan) of Catalonia Reborn: How Catalonia Took on the Corrupt Spanish State and the Legacy of Franco (Luath Press, June 2018)

The United Kingdom faces a series of deep problems which are not going away. All stem from its relentless decline from its position of global hegemon in the 19th century; a decline which has not been halted let along reversed despite the hype about the so-called “Thatcher Revolution,” indeed that only increased it in many ways.


Thatcher’s chief legacy remains the huge gulf in inequality.

London and the South East of England contain the greatest concentrations of wealth in the European Union. But elsewhere there are areas where deprivation and poverty match those in Southern Spain. While the media and politicians debate is dominated by Brexit there are some ominous signs that all is not well.

The numbers of homeless people have grown and are obvious to all (something not confined to the UK as I noted on a recent trip to Brussels). Rough sleeping has increased in England in each of the last seven years. 123,130 children were living in temporary accommodation in first quarter of 2018 – an increase of nearly 80% since 2011.

Patrick Greenfield, Child homelessness in England at highest level since 2007, the Guardian, 27 June 2018

On the high streets of towns and cities more shops are boarded up as household names go to the wall or shut stores, cutting jobs.

Figures released in July 2018 show the mortality rate from avoidable causes is more than three times higher in some of the most deprived parts of the country than in the most affluent; the reason for a shorter life – deprivation. Scotland had the worst mortality rate, followed by Wales, then Northern Ireland and then England. There Chiltern, South Oxfordshire, South Cambridgeshire and Hart in Hampshire had the lowest avoidable death rates. Places with the highest rates include Manchester, Blackpool, Middlesbrough, Hull and Liverpool.

Last year saw a rise in the numbers of children living in poverty as a consequence of welfare cuts, affecting benefits for low paid workers – a majority of children in poverty have at least one parent in work.  The Resolution Foundation found that in 2017 a fall in disposable income meant a three percent rise in child poverty.

One in three children lives in poverty. The gap between educational performance of rich and poor school children would not be closed in over a century on current progress. In contrast, The City of London represents the largest concentration of banking and financial services industries in the world, turning over an estimated $1.9 trillion worth of foreign exchange each day, 37% of global capital flows.

The two are connected. The financial centre brings together a relatively small number of immensely wealthy people but it relies on an army of low paid workers to serve them their coffee, clean their buildings or home, and deliver their acquisitions on Amazon and much else.

Writing in the Financial Times, Martin Sandbu points to the deep contradictions underlying the British state:

“Britain is riven by contemporaneous extremes, too. It has, in London, Europe’s only true global city; it also has badly neglected left-behind towns and areas cut off from a functioning economy. Its universities are world-class, but it has the worst rates of literacy and numeracy of any large western European country. It marries an inordinately lucrative global financial sector with a subpar economy run on low-wage, low-productivity labour rather than productivity-enhancing capital investment. Then there is the class system and the still-unsettled project of a multinational state.”

He then goes on to point to one very obvious contradiction:

“West Londoners’ real GDP per capita is more than six times the EU average. Greater London (commuting may distort the central city’s figures) is one of Europe’s most prosperous agglomerations. At the same time, the worst-off British regions have per capita real GDP levels similar to the poorest areas of Portugal and Spain.”

He might have added the contrast between London and other British regions also exists inside the capital city. That was brought to light by the tragic fire at Grenfell Tower last summer where the victims were precisely those low paid workers who service the needs of the City and the wealthy but were doomed to live in unsafe housing, or by the riots which swept the city in 2011 when expensive restaurants in Chi-Chi neighbourhoods were deliberately targeted.

But there is something more profound at work in the UK; a deep organic crisis caused by that process of relentless decline.

I am not going to analyse the current ins and outs of Brexit, to everyone’s relief, but the fact is the Brexit referendum was the inevitable consequence of the lack of any strategic unanimity among Britain’s rulers. When the original European Economic Community was in its planning stages the UK stayed out, despite the USA wanting it to join as its watchdog within, because it clung to illusions it remained a great power.

After the debacle of the Suez invasion of 1956 and the end of that illusion Britain decided to dump its French ally and to cling ever closer to Washington, which had pulled the plug on the Anglo-French invasion of Egypt. France turned to West Germany as its key ally. Only then the British recognised that Western Europe was their key market and asked to join the EEC. Twice Charles de Gaulle vetoes their application viewing them as an American Fifth Column.

Eventually, in 1973, Britain did join the EEC, a decision ratified by a referendum in 1975, but that did not quell the debate. A section of British based financial and corporate capital still saw themselves operating on a global scale, as in the 19th century, rather than accepting restrictions imposed by what would become the EU.

Margaret Thatcher was a huge fan of the Single Market and policies which would dominate the EU, chiming with her free market views. Her switch to Euroscepticism was to do with politics not economics or social issues, she grasped the British government would find itself under the sway of an EU led by a newly united Germany. That in turn led to an emerging split in the Conservative Party which is still being played out today.

The Conservative Party is the main party representing the British elite but it itself is, in many ways the product of decline and the lack of any cure

In the 19th century when Britain was the workshop of the world, championing free trade, the British ruling class was made up of two, essentially separate groupings. The industrial revolution was carried through by small family firms in Northern England, the Midlands, Lowland Scotland and South Wales – elsewhere later industrialisation needed state assistance – who raised capital themselves or through local banks.

The City of London (linked as always to the Bank of England and the Treasury) was not involved in financing industry. There was no equivalent of German finance capital; banks making “patient” long term investment and taking seats on the board. The City increasingly looked to overseas investments, insurance on maritime trade (Lloyds of London) and on mineral extraction at home. It became intertwined with the aristocracy which was keen to exploit coal under its lands, whose estates produced for the market and who were already marrying off their daughters to rich London merchants and bankers.

As it became clear after 1870 Britain was falling behind industrially to first the USA then Germany, British industry began to depend on protected markets in the Empire and in countries like Argentina, effectively dependent on Britain. But Britain was the creditor country of the world and could loan out capital internationally. The importance of the City grew and grew, as a deficit developed in the balance of trade it could be offset by the profits finance brought in.

Britain lost its financial dominance to Wall Street during the Second World War but tried to cling on, not entirely unsuccessfully. Incredibly British industry acquiesced to the Pound being exchangeable to a fixed gold rate. This kept the value of the Pound high against the US Dollar but crippled exports by making them too expensive.

Post-Second World War there was a brief Indian summer for British industry as it could sell its products to a Europe devastated by war. But as new industries sprung up in Germany, France and Italy with their new machinery and lower labour costs Britain did not experience the full benefits of the great post-war boom, it fell behind in terms of economic growth and suffered balance of trade deficits. Unlike Germany and Japan it had to pay for its bloated military sector, including the development of the atom bomb.

British industry was marked by low investment and, as a consequence low productivity, plus a high level of trade union organisation.

The collapse of the post-war boom in 1973 led to a real sense of crisis when Britain was swept by a strike wave perhaps not as intense as those in France and Italy but greater in scale. Social tensions came to the surface as Britain looked “the sick man of Europe.” The stage was set for the “Thatcher Revolution.”

Thatcher promised to “modernise” the British economy but in reality made zero attempt to develop the industrial base beyond mass closures. High interest rates blocked increasing exports and borrowing to invest. What she did was let the finance sector rip. “Big bank” lifted regulation and led to investment banks from around the world cramming into the city. Further restrictions on pensions, mortgages and insurance policies were lifted with the banks and finance houses rushing in at great profit. Public housing and utilities were sold off cheaply with a welcome return for private landlords and shareholders.

While Britain’s industrial sector shrank to 17 percent of the overall economy, compared to 26 percent in Germany, the City and finance celebrated. Life was one long party. The housing market grew and grew, despite occasional blips. Long term investment took a back seat.

Under the New Labour governments of Tony Blair and Gordon Brown, 1997-2010, the service sector grew to 80 percent of the economy, compared to 69 percent in Germany. The wealth it accrued was concentrated in London and the South East (and Edinburgh to a lesser extent). Elsewhere industrial decline meant work was increasingly low paid and unskilled. Household debt rose from 85 percent of disposable income in 1997 to 148 percent in 2008 when the bubble burst.

New Labour also encouraged a property boom and public services being outsourced to corporations which received state subsidies.

The financial crash saw, as elsewhere, the state bail out the banks, nationalising their debts. The City soon returned to its old ways; investing overseas rather than at home, indulging in financial speculation and overseeing a spectacular property boom in London and surrounds. While it partied on the great majority paid the bill through austerity.

Now some of that story is familiar to readers elsewhere, in Spain for instance. But the point is that in terms of economic growth the UK has more of less put all its eggs in one rather fragile basket.

This saga of decline has created a growing support for independence in Scotland, seen as a life boat from which to escape the wreckage and create a more progressive society. Brexit has brought to surface the contradictions of the 1921 partition of Ireland. The social tensions are all too apparent to anyone who travels beyond the centre of London, often only by a kilometre or two.

In other words the UK is a crisis waiting to happen. To my mind that won’t be caused by Brexit because there is likely to be a compromise deal, but it could be another financial crash, another war or a disaster like that at Grenfell.





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