‘You never want to be in debt,” my grandmother used to say to me as a child. For her generation, debt equalled subservience to higher-ups. She was also a firm adherent to the Micawber principle: “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness.”
But it’s pretty obvious we don’t always see it as wrong to get into debt – many people have mortgages, after all. Nor, sadly, is it always avoidable. The findings from a new report demonstrate as much. An analysis by the Joseph Rowntree Foundation has found that nearly 4m low-income households in Britain have fallen behind on rent, bills or debt payments. The report warns of a debt crisis.
Also, according to the JRF report, around 4.4m low-income households have taken on new or increased borrowing since the pandemic hit; the number of low-income households in arrears has tripled. This is further evidence of a cost-of-living crisis. Things were bad before Covid-19 – employees had endured the longest period of average wage stagnation since the Napoleonic wars 200 years ago. But in the months ahead, spending power is likely to be depleted further.
This is the background against which the chancellor, Rishi Sunak, will deliver his autumn budget this week. The Institute for Fiscal Studies is predicting that the chancellor will have to cut billions of pounds from departmental budgets and increase taxes to plug the financial black hole created by coronavirus spending. Westminster pundits have been speculating as to whether the chancellor will announce a new era of austerity. Will stingy Sunak prevail or will Boris Johnson be permitted to splash the cash on his pet projects?
A more sombre tone would probably be more appropriate. The stakes are a lot higher for many Britons than the Punch and Judy show of Westminster politics. The previous round of austerity during the 2010 to 2015 coalition government may have contributed to the deaths of 50,000 people, according to a study out this month. (Even those with savings in the bank are increasingly unable to find the things they want in the shops. This is not entirely the government’s fault. Supply chains across the world have been hobbled by Covid and the rise in wholesale energy prices.)
Meanwhile, the remnants of the postwar settlement are beginning to unravel. Since the creation of the NHS in 1948, whatever else was going on in their lives, poor Britons have at least been able to see a doctor if they were sick. This can no longer be taken for granted. In many parts of the country, getting a face-to-face appointment with a GP is about as easy as pinning a jelly to a tree.
Then there’s the crisis in social care. I spent several weeks in Blackpool in 2016 working as a home carer during research for a book. I saw a decrepit system that was creaking under the strain of an ageing population. The sector has long been deprived of sufficient funds. To its credit, the government has set out plans to reform the care sector. But working people will foot the bill. Instead of updating the archaic council tax system or taxing wealth and assets (a quarter of Britain’s wealth is held by the richest 1%), higher national insurance contributions will further squeeze those already feeling the pinch.
Increasingly, the truth is that we are a nation where the well-off “make” rather than “earn” their money. House prices in Britain now outstrip wages to such an extent that first-time buyers must save for around eight years to afford a deposit to buy a home. The average home is now 65 times more expensive than in 1970, while average wages are only 36 times higher. Refusing to reform the tax system to account for this eye-watering transfer of wealth is shocking – but also entirely predictable.
The picture is no less bleak for renters. Rents have surged by 8% in the year to September; the average monthly amount paid by tenants hit £1,100 for the first time ever last month, according to the estate agent Hamptons.
So what is the government doing to turn things around? Well, for starters, it recently introduced a £20 a week cut to the benefits of 5m households, the biggest overnight cut to state benefits in British history. Johnson has, however, pledged to “level up” deprived parts of the country, yet most of us still have no idea what that will entail (though this weekend it emerged that Sunak will commit £6.9bn for public transport in England’s city regions).
To be sure, it isn’t all doom and gloom right now for everyone. Thanks to a tighter labour market, some workers in traditionally low-paid jobs are able to demand higher salaries for the first time in years. My brother-in-law, an HGV driver, recently put it to me like this: “It’s a driver’s market and if that means a lack of McDonald’s milkshake, then so be it.”
But one shouldn’t make too much of small mercies. The government has failed to plan ahead for domestic disruption that was always likely to occur as a consequence of Brexit. The country is short of around 100,000 HGV drivers. In response, the government has granted just 10,500 temporary visas to European drivers. Much as it won’t reform Britain’s archaic system of taxation because it fears a political backlash, so the government is reluctant to authorise enough emergency visas for fear of upsetting diehard Brexiters.
Britain’s problems run deep and can’t entirely be blamed on the government. The economy is beset by profound structural problems. Still, by any measure Britain is one of the wealthiest countries on Earth. Yet ordinary people are increasingly working longer hours for less money in more insecure jobs. The “new normal” is a deteriorating standard of living, higher taxes and poorer public services.
Ahead of a further dose of austerity, it’s worth then asking: is this just what we’ve come to accept?