With chief executive pay booming and little sign of self-restraint or regulation, Dick Skellington highlights how the burden of austerity is falling on the weaker and more vulnerable.
Bonuses and chief executive pay are once again in the headlines: these are the winners in Coalition Britain. The winners, like Sir Fred Goodwin, may lose their baubles but their wealth remains inviolate. Sir Fred will have to change his letter heads, a trifling inconvenience, that is all. But while the rich enjoy largesse, there is growing evidence that the ‘have nots’ will have less and less. This is the raw truth about Austerity Britain the Coalition is anxious to conceal. Surveys since the new year have gradually brought the harsh reality into the spotlight.
First up was the study by the respected Institute of Fiscal Studies (IFS), commissioned by the Family and Parenting Institute last year. It reported that a couple with two children will be £1,250 a year worse off by 2015 as some households in Britain – specifically the poorest, the elderly and the disabled – shoulder the burden of austerity.
Couples with two children will, it seems, become more reliant on state benefits, and more so than households without children, according to the IFS. Worse, for a Government that still claims we are ‘all in it together’, lone unemployed parents will be hit even harder, losing £2,000 of their annual income, a 12 per cent drop at a time when utilities and rents are rising, and when the threat of unemployment is increasing. More and more of us will soon find the struggle to balance the challenge of finding a job with childcare responsibilities and costs even harder as incomes decline and services are axed.
The IFS predict larger families will take a disproportionately larger hit, mainly as a result, yes, you’ve guessed, of Coalition benefit caps which come in during 2013-14. Families with three children will see their incomes fall by 6.8 per cent, while those with one child will see their income fall by 3.3. per cent. The problem for the Coalition is that the planned introduction of the Universal Credit, scheduled for 2013, will, according to the IFS, only marginally improve the prospects for most households, and not enough to forestall severe drops in family income.
There were further bleak research findings last month, findings which demonstrate that where there is grief and suffering, someone makes a profit.
Every two minutes, according to Shelter, someone in Britain loses their home. The insolvency trade body R3 reported that pay day loan companies, those that offer high-interest credit to cover rent and mortgage costs, are expected to thrive in the next three years. R3 report that an alarming seven million people will rely on such high-interest credit as they struggle to keep a roof over their heads, simply because they are struggling with conventional providers, who are unwilling to lend. Some of these companies exploit customers with rates as high as 5,000 per cent. The Office of Fair Trading (OFT) has promised a review, but given the R3 findings, it is easy to see how the vulnerable can not only be exposed to bad debt, but to the most expensive bad debt imaginable. OFT believe that already one million people rely on such arrangements to survive.
The Resolution Foundation reported, that as many of us have long suspected, the run-up to the deficit crisis left many households not well disposed to survive it. Between 2000 and 2010, the cost of a basket of essential goods – including food, fuel and public transport – rose by 43 per cent. Household fuel, like food, more than doubled, while water bills (not including last week’s increase of 5.7 per cent) rose by an astonishing 68 per cent! This was far higher than either of the measures of inflation (RPI rose by 35 per cent and CPI by 27 per cent).
So we were in a hole before the crisis hit. Now, according to the Foundation, 30 per cent of UK households have incomes too low to afford the essential basket of goods. Their message to the Coalition Government is simple: ‘the decision to freeze tax credits, or link them and other benefits to CPI, a lower index of inflation than has been used in the past, will make this problem worse’.
But it is not a question simply of household income. Where you live is vital. The Centre for Cities think tank report on British cities – Cities Outlook 2012 – also came out last month. It showed that the wealth gap between Britain’s more prosperous and poorest cities is widening, and is expected to widen further during the life of the Coalition Government. The cause is rising unemployment and disinvestment, and the public sector cuts announced by George Osborne.
The report confirmed that those urban centres dependent on public sector jobs will be increasingly hit hardest. Worse, these areas are the areas where the private sector tends to pay lower wages, and as prices continue to rise, more and more people are going to find things increasingly tough.
The Centre found a broad North-South divide in how cities are surviving the economic downturn, with the traditionally hard hit North East, hardest hit. Sunderland, for example, had the highest number of firms going bust in 2011 relative to its population. They found too that the difference between unemployment in Hull and Cambridge has doubled since 2008 and is expected to widen further.
And of course within these areas, there are even wider disparities. There are six times more claimants in Rochdale than there are in Cambridge. Cities such as London, Cambridge, Edinburgh and Aberdeen are doing much better in the age of austerity than Hull, Sunderland and Swansea.
Austerity is having a severe impact on the elderly across Britain, especially in those areas cited above. AgeUK published a damning report last month called Care in Crisis 2012, which demonstrated that the impact of growing service demand and a £341 million cut in elderly care budgets in this year alone, represented a 4.5 per cent cut in real income for the elderly, especially those over 85.
AgeUK predict that the Coalition Government will have to spend a minimum of £1 billion in 2013 just to stop the plight of old people deteriorating further. The prospect for old people, particularly those relying on social care, is further threatened by local authority cuts in services – on average a 28 per cent reduction – made since 2009 to help shrink the deficit. Since 2005, local council services for people assessed as having ‘moderate’ care needs, according to AgeUK, fell by over 200 per cent – a funding gap estimated at over £500 million a year. An AgeUK spokesperson commented: ‘Behind these figures are real people struggling to cope without the support they need, compromising their dignity and safety on a daily basis…..it is the support that helps older people get out of bed, have a wash, live a life that is more than just existence’.
Finally further research from the Resolution Foundation into children from low-to-middle income (LMI) families reported that they now start school ‘well behind their affluent peers’. They found that LMI children start school on average 5 months behind their richer peers in two key areas, vocabulary and numerical skills. A combination of socio-economic hardship and a decline in parents reading to their children at home, and taking them to visit museums and libraries, was having a detrimental impact. The age of austerity is having an increased impact on the capacity of parents to paren
So if you are old, or a child, or a single parent, and you live in Sunderland, you know you are bearing the burden for the bankers' folly. Rather than strip Sir Fred of his knighthood, he should be invited to visit these underprivileged households, these ‘real people’, those most affected by Coalition cuts, and to live under their threatened roofs for a few months. Some period of community awareness may humble Sir Fred, and other bonus recipients, enough perhaps for them to learn the error of their ways.
But I doubt it. The problem is the winners in austerity Britain, like Cameron's cabinet of millionaires, have lost touch with the Britain that is bearing the burden of the cuts. And the dark days are only just beginning.
For an analysis of how the Coalition austerity measures have so far failed the country see Professor Danny Blanchflower's visceral analysis in the New Statesman.
Dick Skellington 8 February 2012
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