Cracking the Whip of Unemployment

Well, as I had feared, just as has been the case, unemployment has completely sapped my inspiration. Despite having more time to blog, the spirit has gone out of me. Unemployment is terribly insidious it saps the will to do anything much. I suppose this is because most of us are people of routine. When you are unemployed, you can make yourself a routine: I rise at the same time each day (7.30am) and look for jobs in set locations on set days of the week, but I know it is false and it is only because I am compelling myself to do it that I do not let the apathy of unemployment completely swallow me. Of course, I have only been unemployed for two months, so it might be tougher in the future to overcome this. I have heard that women find it easier to cope with unemployment than men do, because their lives change much more than men's; every month their period throws them off track to a greater or lesser extent and they learn how to overcome feeling tense or tired or washed out and yet continue with the daily chores much better than men do. Perhaps this is why men are becoming obsolete in modern society, but that is a topic that I have already tackled.

One thing which is not the case is that I have not lost the desire to work. To some extent the more unemployment saps me the more I want to escape the effect it is having on me and I know that will only come from having a job. Consequently, when I do have a focus, i.e. a particular job to apply for I put lots of work into it. I have an interview tomorrow and I have spent a day reading all I can about the company and the people who are going to interview me, so that even if they are not well prepared for the interview and like many interviewers even uncertain about what they actually want, I can hopefully demonstrate that I am the person they need to employ. Of course the job is temporary, not permanent and pays £9000 per year less than I earned in my last job, but that is what happens when unemployment rises. It provides an excellent opportunity for employers, especially in the UK, to force down salaries (though prices are not falling as fast, of course) and to reduce job security.

British employers always feel their workers are lazy and over-paid. It may have been proven that when compared to workers in eastern Europe, British workers do not work the longest hours, but certainly when compared to neighbouring states such as France, Belgium, the Netherlands and Germany, post-industrial, western European economies which we should be on a par with, UK workers do work long hours. In terms of pay, well, we have the added burden that the price of housing, food and petrol exceeds the costs in neighbouring states and we receive only 12 salary payments per year compared to the 14 they get in Belgium and the 13 workers even get in South Africa. Despite this, the xenophobia and lack of language skills of the British, means most of us are ignorant of these facts so sit back while employers tell us we are lazy and greedy and should be grateful that they deign to give us any work while they take salaries and bonuses equivalent to the combined pay of large sections of their employees.

Last year, I wrote about how many employers felt that with the prosperity of the UK since the 1990s, they had lost the 'whip' of unemployment to frighten workers into being compliant and accepting poor pay and conditions without complaint. Ironically, even immigrant workers especially from elsewhere in Europe were unwilling to take what employers felt was 'fair'. People complain about migrant workers but forget they would not come if employers did not seek to bring them into the UK as a cheaper alternative to training British workers and skilling them. You notice that there is a sector of society which despite being right-wing, is pretty quiet on the immigration issue and these are employers who want the cheapest labour they can get. Now that Poles and other migrants are returning to their own countries now that the UK economy is in downturn, their only option is to pressurise British workers to take lower wages.

Radio news broadcasts today have reported that 'the economy is picking up' and that there are more jobs available. UK unemployment remains at 2.4 million, the highest level since 1996 and conflicting reports say it will worsen. Peaks in unemployment tend to lag behind the economic crises. The economy in the UK nosedived in 1981 but unemployment did not touch 4 million until 1983 (of course real levels were concealed by the Thatcher government's distorted methods of reporting the figures). Unemployment did not start falling until about 1987 and still remained around 2.2 million in the supposed boom of 1989. There was another peak in the recession of 1990-3 getting back to 3.5 million briefly before a steady decline through the remainer of the 1990s and into the 200s, returning below 1.5 million around 2004 for the first time since 1980; 24 years earlier.

Such broad figures conceal the fact that often the people in work were in part-time or temporary jobs rather than permanent ones and at lower salaries than they had been previously. Of course, such factors dent consumer confidence and slow down the economy so holding up recovery in other elements of the economic system outside employment. Ironically, I have not seen any figures on how many jobs the introduction of the minimum wage created. Right-wingers whined that it would wreck the economy, whereas in fact by increasing consumption it helped stimulate service-sector orientated Britain in the late 1990s and most of the 2000s.

To me it seems that employers do not feel that the recent recession has stung hard enough yet. I think most would love to get to a situation where they could say 'we could employ so many more people if there was no minimum wage in the way, it needs to be suspended or scrapped'. Though this is not in David Cameron's list of policies (assuming he actually has one; it is not visible) but I could imagine him being sympathetic to such arguments if he comes to power in 2010. British employers always think they pay too much tax even when it is at historic lows, far below what they paid in 1981. They always feel salaries are too high, even though if they fall further consumption in Britain will continue to be suppressed. I know of no country where business is so indignant about what it sees as its rights and the fabricated 'uppity' nature of its workers that it would cut its own throat in terms of sales to get back at employees. Greed in Britain blinds employers to the fact they are part of a complex economic machine and if they keep banging one part of the machine the rest of it will not work that well. Just look at the German government's policy of paying businesses to keep people in work compared to the slash-and-burn attitude with jobs in the UK.

Anyway, this brings me to my main point about today's 'news' about recovery. If everyone believes that there are more jobs available, then employers can whine 'anyway unemployed is not trying hard enough to find work; they are demanding too much in terms of salary/security'. This happens through individual behaviour already. I am applying for jobs that last only 2 years (so far I am ignoring maternity cover jobs as I know it will cost me more to move to the area than I could make back in 9 months) and at salaries two-thirds of my previous level. Thus, even if I get work, I am still going to be going on no holidays, not buying any clothes or DVDs or a new car. My contribution to the economic recovery is going to be minimal, it is just that I will not lose my house. I know we consume too much, but until you can work part-time locally and travel on wonderful public transport to reach your job and still afford to pay rent on even a small house, then I need to push for better terms. The bulk of us will never be self-sufficient and live in a yurt, so we have to make living in 3-bedroomed terraced houses with a 10-year old car out front at least feasible on an income which is 50% above the national average salary. Heaven forbid that some of us might want to take time to train as a teacher or a social worker! No way of doing that without becoming homeless. Saying this, as someone pointed out after training as a social worker (which the UK is desperately short of) you can earn £28, 000 (€31,640: US$46,200) per year and get attacked in the media at every turn whereas if you train as a manager of the discount supermarket Lidl you can earn £45,000 (€50,850; US$74,260) per year and get hassle only from the occasional irate customer not newspapers selling millions of copies.

We will all jump at the poorly paid, insecure jobs because the bulk of us want to work and any work is better than unemployment. However, again we will have allowed employers in their delusions about their own personal greatness and our supposed greed, to knock us back into living a life that is nerve-wracking and does not permit us to plan or save or experience life. The whip of unemployment is being cracked by this latest claim that there are jobs and the only people not taking them are the lazy or the too-demanding. It is a lie. Unemployment is high and rising and forcing people into temporary, low paid jobs is going to continue that situation for far longer than would be the case.

A New Thatcherite Nightmare Approaches

With the overturning of such a large majority in the Glasgow East by-election last week, Labour's 25th most safest seat there are a lot of ill-judged statements that Labour will be down to only 20 MPs following the next election in 2009/10. As I state before, that is a very faulty conclusion to draw from the evidence, as was information from the recent by-election in Henley which is ultra-conservative and where Labour did not stand a chance (the relative success of the BNP there has been mainly overlooked and should not have been, especially for the Conservatives). However, it does seem that the Brown government is under siege especially from the media and that there is now a high chance that he will be pushed out by his own party before any election occurs. However, I believe that people are unaware of the hazards that the UK faces if Labour loses the next election whether under Brown or someone else.

One of Brown's problems, is of course, that in 1997 the British electorate did not vote the Labour Party into power, they in fact voted for the Blarite Party, a Christian Democratic party with authoritarian overtones and an excellent control of the media. With Blair's departure the government has lost those characteristics. Blair knew this would be the case which is why he hung on so long. On his terms, his great failure was not to groom a Blairite successor who was strong enough and not corrupt to face down Brown and continue the Blaritie legacy. In addition Brown plays fair in a way that Blair never did. Brown believes people vote for policies, whereas, in fact, as Blair and especially his media sidekick, Alastair Campbell, knew, people vote the way they are told or are frightened to do by the media. Brown has let go that control of the media. I would hate him to be as manipulative as Blair was, but at least he needs to be better about getting his message and items of good news (like falling crime rates in many parts of the UK) across.

This failure is why David Cameron, leader of the Conservative Party, has managed to get away with having no policies, because everyone is focusing on Brown, and for the past few months, in seeking on his removal. As they are not being prompted by the media, no-one is looking around to see what the alternative actually offers. Cameron could slide into power more easily than any British leader before. Of course his lack of policies puts him in favour with the ultra-rich who effectively control the UK economy. With the economic crisis the world is facing, Cameron, most likely behave like Stanley Baldwin during the economic chaos of the 1920s and adopt a kind of 'Safety First' approach, i.e. one that means sacrifices from the ordinary populous in order that the wealthy are not upset a great deal. In fact this has been the Bush Jr. approach right throughout, so perhaps it should not be expected.

Of course in their rush to find more nails to put into the coffin of the Brown administration, many commentators seem to have been lazy in interpreting what went on in the Glasgow East election. Yes, it was a 22% swing in the poll, but to apply that across the UK and say it would lead to 20 Labour MPs after the next election, entirely misses which way the swing went. This, to some extent, shows up the differences between England and Scotland, especially its cities. The SNP (Scottish Nationalist Party) is in theory a party striving for Scottish independence, but that is not why most people vote for it. The SNP is to the left of Labour and certainly has been since the 1990s so it gains support from those people wanting a more Socialist approach to policies. In Scotland whereas late as 1980s 60% of the population rented social housing, and where education is still seen far more importantly than it is in England, this is the natural environment for left-wing policies. In 1997 the Conservatives lost all their seats in Scotland. I hardly envisaged that we have seen such a shift to the right that suddenly all of Scotland is going to love the Conservatives. Of course as in the 1980s and 1990s a Conservative government in London encourages many more Scots to think about breaking away so that they can have governments more to their taste, which for the majority are to the left of the current government.

The governments in power from 1997 have done far less than they should have done. Even if it had been Brown rather than Blair who had come to power in 1997 and only remained until 2001, then I believe more would have been achieved than we have witnessed with even a further 7 years of power. However, there are things that will cause real pain to ordinary people when the Conservatives come to power and neglect or scrap them. You might say that they are not going to overturn this legislation, but the one thing that has come out of Cameron is to say this:

"The Labour Party for a long time said it could deal with deep poverty because it understood about transferring money from rich to poor. I think we have reached the end of that road."

Thanks to Polly Toynbee in 'The Guardian' for highlighting this. She also noted how pleased right-wing commentators were about how 'brave' Cameron was to highlight that the 'experiment' of moving wealth from rich to poor should end. This is even worse than Margaret Thatcher. I loath her, but at least she believed there was a 'trickle down' effect in that if people at the top were prosperous then money would shake slowly down to the lower people in the economy. It never really worked that way, but being a daughter of a grocer and having gone to grammar school rather than the elite public schools that Cameron and the buffoon Boris Johnson attended, she at least saw people worse off than herself. She also emphasised hard work, rather than wealth coming to people as a 'right' in the way that Cameron and his ultra-rich supporters believe. Of course people made obscene profits under Thatcher and will again under Cameron, but there will not even be a gramme of moral censure on them for living that way.

One of the most effective coups of the Conservative of the 1980s was to portray the Labour Party as unable to deal with the economy. They achieved this by also effectively shutting themselves off from the legacy of the Conservative government of 1970-4. Though Thatcher did not name it so, effectively the Conservatives post-1975 were 'New Conservative' and so different economically from the Heath government. They condemned the economic policies of Labour as leading to unemployment under the 'Labour's Not Working' slogan, though of course once they were in power, unemployment rose from 1.6 million to 4 million. The Conservatives also oversaw the ever biggest crash in UK house prices 1990-3. Of course given how tied the British economy is to housing this had severe effects all over the economy and effectively shoved many middle class people, the very supporters of the Conservatives, down the social ladder. The Conservatives these days are no longer the party of the comfortably well-off or even the prosperous, like the Republicans in the USA, they have become the party of the extremely rich but use those well-off people lower down society as their base of support though actually not benefiting them. Conservative supporters are surprisingly masochistic and you still hear that terrible lie about Thatcher, 'she did things that had to be done, everyone agrees about that'. That statement which I have been hearing since the mid-1980s is still infuriating. Thatcher wiped out the lives of many middle class people, they know that and yet they feel they had to sacrifice their prosperity and the futures of their families because it was 'necessary'. Dictators love this kind of sacrifice and the average Conservative supporter is lining up to sacrifice themselves all over again in the 2010s. Meanwhile the rest of us are going to suffer in their race for martyrdom.

There are two policies which the Conservatives will scrap or let become moribund that will have a vast impact on social inequality. I can tell you for certain that by 2015 the UK will have far more people in poverty and will be a far more divided society than it is now. The first policy is the minimum wage. This was introduced in 1999, more than a hundred years after it had come to Australia and New Zealand. I have not seen much written on the social impact of the policy in the UK. Of course businesses said it would bankrupt them, but that in fact was not the case, and many still get away with flouting the law. However, I was living in East London at the time, one of the poorest areas of the UK. The minimum wage came in at £3.60 (€4.53; US$7.20) per hour for workers over the age of 21. At the time I knew workers in shops on £2.00 per hour (before tax of course). My father, working in Newcastle-under-Lyme met a woman working in a fish-and-chip shop where the cheapest meal was £1.90 and she was only earning £1.80 per hour. That indicates how low such people's purchasing power was as fish-and-chips are the cheapest takeaway food in the UK. This October, the rate for over 21s will rise to £5.73 per hour (€7.21; US$11.46) but given that 1 litre of petrol now costs £1.20, a loaf of bread costs around £1.30 (€1.63; US$2.60), and 1 pint (about 0.45 litres) of beer costs £3 (and is expected to rise to £4 this year) no-one is going to be wealthy on that income.

One reason why there has not been such an extreme slump in consumption in the UK that people expected is because of the minimum wage. The week it came into force you could see the shift in East London, the supermarkets, the buses, the underground trains, hairdressers, newsagents, the laundrettes, the pubs, the takeaways all suddenly had new customers or customers spending more. This in turn meant they could cover their increased wage bill and even employ more people. Everyone forgets that the poor are far more numerous than people in every other social category. Even the wealthiest person wants only one dinner however expensive it might be, a block of flats housing say 2000 people, need 2000 dinners and even if they are just fish and chips, this stimulates the economy at the grass roots far more than the single rich person. It becomes even greater when people in that block start all buying a fridge or a television.

Of course the minimum wage, the ultra-rich feel, must wither away as they feel it is making the population too cocky and unwilling to work in low wage jobs and also to stay compiant when in them. In fact given that so few people in the UK can save anything (and utility bills in particular are strongly cutting into the benefits of the minimum wage) they are actually as scared as they used to be. The harsher benefit regulations being introduced will add to that fear.

The other thing is the Working Tax Credits. Tax Credits were introduced in April 2003 and brought together tax credits that had covered families and disabled people before with a wider scope. The thing is that the people affected by them is now vast compared to what it was before, 82% of UK families with children now receive tax credits. It is a major source of income for single parent families. As the rate is related to the amount people are earning encourages people to find work. It does not cover the cost of child care which is the prime obstacle to parents of either gender working, but primarily women. Child care workers earn about £3 per hour per child and can make a reasonable income if they take in up to their maximum, which is about 4 pre-school children per adult. However, the cost of such care even at the lowest rates (and of course many charge even more) is £24 per day, £6000 per year for a parent working full-time, which you can compare to the average annual salary of £24,000 which 80% of the population earns less than. So I believe there is some way to go with Tax Credits, especially from a government which supports people having children (though Brown does this less than Blair whose Vichy-like Catholic influenced attitude was much more active in this). Taking away the hundreds of pounds per month that the large majority of families gain would actually increas unemployment almost immediately and would lead to a shooting up of child poverty.

What is fascinating is that Tax Credits prove that salaries are far too low in the UK. Though we are a country of many multi-millionaires, we have reached a state where the cost of living in the UK is so high that the government has to effectively subsidise more than 8 out of 10 families to be able to keep them out of poverty. The British have faced a year-on-year decline in how much their salaries can buy. If a teacher had the purchasing power that profession had in the mid-1950s they would be earning £80,000 now rather than the £25-30,000 that they do. When people complain about wage inflation they forget that a £1 million pound bonus for some utility company boss could pay the salaries of 33 teachers for a whole year. The cost of basics in the UK is cripping, with combined gas and electricity bills reaching £1000 per year for the average family, we are all effectively going to become dependent on the state to be able to pay for these things. Of course the British are big consumers of luxuries, but given our service-sector faced economy the inevitable fall away in consumption of these as is already happening, leads to unemployment.

So, with the UK already seeing a rise in unemployment and in inflation we are on track to have a government from a party which has no ability to manage unemployment and all it does is point the blame at those who lose their jobs and make them feel guilty for being discarded by businesses. Even Labour has had no ability to rein in the greed of utility companies and it will be worse when the party that gave those utility companies such freedom returns to power, especially as many of their friends are on the boards of these companies. Of course the UK like every country is buffeted by global economic challenges, but the way you weather them depends highly on the policies adopted by the domestic government. Just at the time when we need the economic strength of Brown when he was Chancellor, we are facing having an elitist party that does not care a damn about the bulk of population. We are rushing headlong towards a revival of 1983 and anyone who lived through that era must fear its return.

Property in the UK 9: My First Steps to Losing My House

I suppose it was inevitable. I had expected house prices to begin falling this year, but I had not expected oil prices to rise. I had expected Iraq to stabilise and for more oil to be coming from there, I did not realise that Chinese consumption was going to step up so suddenly, forcing prices higher and higher and in turn both petrol and oil prices. Anyway, consequently with petrol having risen by 30p per litre in the past year and food costs for me by about 20% in the same period, I suddenly found this month that all my salary had been spent by the first week in May. Myself and the woman in the house sat down to see where we could all cut back. Her online business has collapsed as other people not only in the UK (she sells in Europe, USA and to expatriates in China) have stopped buying anything they see as frivolous. This means she will have to go out to work (something she loathes, she feels people despise her and patronise her when she is an employee which is why she always tries to be self-employed). She pointed out I was spending £32 (€40; US$62) per month on coffee at work. I have also stopped doing the lottery at £8 per month and cancelled both house contents and life insurance saving about another £80 (€100; US$156) per month. We also had a cleaner at £64 per month which we are laying off, so altogether we reckon we can save £183 per month which is enough to cover my petrol bill or about three-quarters of the monthly groceries. This means we do not have to sell the house we have been in for just under five months.

We have a fixed rate mortgage for five years, but got it when the interest rates were at their peak. House prices have slid constantly since then and we think we over-paid for this house anyway so if we sell we will have lost probably at least £20,000 (€25,200; US$39,200) on what we paid for it. Also British people dislike quirky decor in their houses so the Victorian style interiors that came with it (and of course we cannot afford to change now) will make it as hard for us to sell as it was for our predecessors here. Also the market is being flooded by people trying to dump houses that like us they can no longer afford to pay for. In addition, many people who bought buy-to-let properties are now dumping these even though they do not live in them. Repossessions by banks of houses on which people are no longer able to pay their mortgage have risen by 17% so far this year and the estimated figure is 45,000 in 2008 compared to 27,000 in 2007. We are not back to the level of the 1990s, the peak was over 80,000 reposessions in 1991, but there seems nothing to stop this climb. In addition, the mass year-on-year repossessions of the early 1990s put cheap property on to the market whereas since the early 2000s bank policies have changed and they keep repossessed property and set a high price and wait until the market rises back up to it so that they get more money back than auctioning off at a low price as they did in the 1990s.

For now, 'tightening our belts' should mean we do not get into danger over the mortgage. It does mean all luxuries have gone, no more meals out, no holidays (those we had, I realise now were foolish), no more DVDs or electrical goods. It is hard to explain to the 6-year old in our house why these things have stopp. My fear is that costs will rise further and that in the future having taken up all the slack in our finances there will be nothing left to economise on. We only need the car to go wrong or one of us to need dental treatment for it to soak up all the meagre savings we have left and us like an increasing number of house owners to begin the path to losing the house and all the money we put into it.

With hindsight we could have done things differently: bought a cheaper house, moved to a cheaper town (certainly one closer to where I work), continued renting, but of course our options were limited with two landlords in a row mistreating us, forcing us to move on as quickly as we could into what have turned out to be bad houses for us. My prediction is that by May 2009 I will have lost this house and with it all the money I saved and invested through the 2000s in that flat in London (where I was also shafted). In the UK of today you do not only have to be clever with money (which I am clearly not) but you have to be very, very lucky. I earn 50% per year more than the national average salary, so I am not losing my house just yet, but my contract expires in August 2009 and with people already being made redundant by my company it is clear I have no future there as they always simply do not renew the contracts of fixed-term staff like me. I have lived through the very nasty unemployment of the 1980s and the house fiasco of 1990-3 during which so many people suffered terribly and yet I managed to escape by being flexible and not investing in anything. As you get older though humans naturally crave stability, but in the UK though we are encouraged very hard to buy houses, doing that just makes you vulnerable to the economic turmoil that seems to buffet us so regularly and then the people who urged you to buy a house are totally unsympathetic when you are kicked out. The bulk of us are simply hard workers, not successful gamblers and yet we are forced by British society and its economy to constantly gamble with our future.

As I told the 6-year old, not getting some things he wants now may help his mother hang on to this house, but I think more likely is the outcome I threatened him with that in a few months he will no longer have a bedroom of his own, not have a garden and many of the electrical goods now in the house will have gone. That is his future and most likely the one of many hundreds of thousands of British families, just because greedy American bankers could not be content with the mortgage market they had.

People Wrong to Think Labour Will Lose the Next General Election

I was quite astounded at the weekend to read that Labour MPs are going around assuming that their party is going to lose the next election which has to be held by 2010. Labour has been in power since 1997 and it seems typical in Britain that we tire of the same politicians after a decade. This is why Tony Blair left office after that time, that and the fact he was exhausted by the job. Owing to the fact that in the 1970s Labour and the Conservatives came in and out of power almost in turn, there is some kind of assumption that long periods of rule by one party are not acceptable in the UK. However, in fact, it was the 1970s that were the anomaly. The National Government was in power 1931-45 (14 years), the Conservatives 1951-64 (13 years), 1979-97 (18 years) and Labour 1964-70 (6 years) and 1997-2008 (11 years, so far). Of course within those governments there have been elections and changes of leader and ministers, but it has been the same party in power. Why should not Labour have at least another 7 years following Blair's period, and Brown still be in power in, say, 2014 in the same way that John Major was Conservative Prime Minister 1991-1997 after the years of Conservative Margaret Thatcher (1979-1991)?

The government is facing many challenges, primarily economic, but ones which are predominantly out of its control and stem for the global jostling for resources that I have regularly noted on this blog and which seem to resemble a real-life game of 'Risk'. In fact Brown's economic stringency of the past decade has probably protected the UK from experiencing even worse problem. The UK is always going to be vulnerable because of its obsession with buying houses which are huge items of capital expenditure for most families that are hard to sell on and have so many elements feeding into them that people cannot modify their expenditure on them the way they can even with consumer items like food. In addition, the privatisation of the UK utility companies means that the government is powerless to rein in the huge profits they make at the expense of ordinary consumer. The fact that BP and Shell the UK and part-UK owned oil companies announced quarterly (i.e. just in 3 months) profits of £7 billion (€8.82 billion; US13.7 billion) suggests that actually big business is not suffering at all from the 'credit crunch'.


A Conservative government would be as impotent in the face of global demand and multinational companies as a Labour one is. In fact given their aversion to regulation and control they would probably handle it worse. The only thing that is going to stop the average person suffering even worse than they are now with consumer-goods inflation, is through greater regulation and intervention. Petrol has risen from £0.87 (€1.09; US$ 1.71) per litre last year to £1.10 per litre now and it is predicted to reach £1.50 per litre by mid-2009 almost a doubling in 20 months; diesel is even higher so affecting the freight industry so raising the price of food and consumer items. Clearly given the vast profits of the oil companies such price rises are not needed to compensate for their increased costs. With the Conservatives in power, the bank Northern Rock would still be floating around with no-one willing to take charge of it and with its risky financial products and need to secure more business it would be continuing to unsettle the jittery bank sector. Labour currently intervenes too late. The UK economy would be better if Northern Rock had been nationalised in 2006 not 2008. Fear of being labelled 'Socialist' is hindering the current government from acting in good time. The Conservatives, in contrast, would not act at all and simply blame workers for trying for higher salaries and would probably engineer a house price collapse as they did in 1990-3, knowing that British people do not riot or revolt they simply blame foreigners for their problems and the Conservatives can tolerate a few race riots.


Why would anyone then vote for the Conservatives? Okay, so most people dislike greater state control, but what different can the Conservatives offer compared to Labour anyway? The policies of Labour and the Conservatives are very close, centred around the Thatcher Consensus though Labour is only achieving things by stepping away from that consensus, but they are not straying far. The Conservatives do not even have that kind of distinctive economic alternative to offer. David Cameron is 41; Gordon Brown is 57 so an age difference seems to be the key thing between them. Neither is particularly charismatic. Cameron cannot shake off the silly public schoolboy image and Brown seems too dour for the British public.

I can accept the point that people may simply select the Conservatives because they have not been in office for a while and Cameron is a bit younger, but is there nothing else to motivate them to switch? I suppose given the level of voter apathy in the UK it will only come down to the votes of a few individuals. Then, again, I would suggest to anyone who is confident that Labour will fall at the next election to look back to 1992 when everyone was assured that Labour would win when put up against boring John Major and yet he was victorious and remained in power until 1992. Being in office so long, Labour has become the 'conservative' party if not actually the Conservative Party and I feel that the lethargy will bring a victory for Labour as it did for the Conservatives. By 2014 hopefully things will be totally different. For now, though, whether you are a Labour MP or just an ordinary member of the public I would not anticipate Labour leaving office at the next election at all, no matter if they lose council seats today.


P.P. Maybe I am deluding myself, with Labour down to 14 councils compared to 45 for the Conservatives and Labour only getting 26% of the vote maybe there will be a landslide for the Conservatives. Pundits always scale up local election results to give pictures of potential UK wide election which is always more distorted than usual assumptions. They suggest Labour would go down to 176 seats and the Conservatives would have a 138-seat majority. As I have commented before things are always distorted by the UK's first-past-the-post system and even if you get just one less vote than the candidate who beats you, you get nothing even though almost as many people have voted for you. I think why I find it incredible that Cameron could become prime minister is due to something Simon Hughes, President (not leader) of the Liberal Democrat party said about the Conservatives being 'policy light'. Labour as the incumbent government may be following 'steady as it goes', but the Conservatives have come through with no policies that are at all memorable. They are not even putting up a strong opposition to Labour on anything much.

The points of contest are not an issue at present such as the UK's role in the European Union. With the two parties so close on the various wars we are involved in, tax, education and the National Health Service, it seems unlikely we would get anything different if the Conservatives win next time. So, as I commented yesterday, it almost comes down to which person you prefer. An election on this basis would be a real step back for British politics. Even though I despise Tony Blair I could never argue that he did not come forward with distinctive policies in 1997 (whether he carried any of them out is another issue). What is Cameron offering but a smile?

P.P. 16/08/2010: I suppose some people could come back to me now and say 'ha, ha, you got it wrong' and yet I would argue that my judgement was not badly out given how incomplete the Conservative victory was and that the fact that we could have had a Labour-Liberal Democrat coalition government instead.  The aspect in which I made my biggest mistake was in assuming that because Cameron was not outlining policies it indicated that he was close to Labour in his thinking on these issues.  What I realise now is that he had an alarmingly virulent New Right agenda in mind which was going to smash the public sector and hamstring the British economy for years to come for the benefit of the already wealthy.  I think in my worst nightmares I never foresaw the immense damage that the Conservatives would inflict on the UK.  Using the cost of bailing out the banks as their 'September 11th' excuse (i.e. the way that President Bush used the terrorist attacks on the New York World Trade Centre and The Pentagon to justify harsh domestic policy), they have imposed such a swingeing attack on every facet on life in the UK.  Their incredible arrogance is shown by the ending of support for speed cameras which were in fact self-funding and reduced road deaths, not for any financial reason, but simply because 'their people' love to drive recklessly with impunity.

Northern Rock and Nationalisation

I acknowledge that I am pretty tardy with this posting but illness has kept me away from my blog. My irritation about comments on the nationalisation of the Northern Rock Building Society last week remains sufficiently high to prompt me to cast off another tablet of lead about this issue. The main thing that rankled me was that the Conservatives said that the nationalisation showed that the Labour Government could now not be trusted on the economy. I would accept this as a criticism if Northern Rock had got into trouble whilst it was owned by the government, but the difficulties it encountered were engineered by those running the building society, not the government. Even the Conservatives have had nothing to complain about the low inflation, reasonably low unemployment and not too bad growth of the UK economy since the 1990s. What you can argue is that the government has drawn been unwilling to allow the harshest consequences of the undemocratic capitalist economy we live in, biting. Northern Rock has 1.4 million people who save with it and 0.8 million people who have mortgages with it. If the government had allowed the building society to collapse these people would have all lost their money. This would have led to a dent in expenditure at a time when the Bank of England is concerned about slowing consumption. It would have also thrown all these borrowers into the market desperately looking for mortgage replacements. The nature of many of the products that Northern Rock sold meant that many customers would have found it difficult to relocate their mortgages. Repossessions are currently 20% higher than they were in 2006; 27,100 houses were repossessed in 2007 compared to 22,400 in 2006 and 10,260 in 2005. This is lower than the 70,000 per year in the peak of the 1990-3 slump, but is clearly a bad sign for the British economy which is so focused on house ownership. In addition, Northern Rock, though it now has branches across the UK is heavily focused in northern England and so the impact of the first British building society collapse since 1892 (The Liberator Permanent Benefit Building Society, at the time the largest one in the UK, wrecked by the activities of its founder) would have fallen more heavily in some towns. The other thing was the impact of seeing queues of people outside Northern Rock branches in September 2007 when the building society's problems began, some crowds of whom had to be dispersed by police, was not a good image, being to reminiscent of the crash images of the 1920s and 1930s.

Anyone who knows people with mortgages could have told you ten or fifteen years ago that Northern Rock was going to be in difficulty some day. The trouble is that bankers and politicians do not listen to ordinary customers. In the 1990s I never heard a single good word about Northern Rock from anyone I knew who had a mortgage with them. There were constant complaints about their customer service and the poor level of information that they provided. Consequently for the past two decades, in an increasingly complex mortgage market (now you can get mortgages from all sorts of businesses including supermarkets), the only way they were going to win and retain customers was through making more and more attractive products. This is how they ended up with the extremity of 110% mortgages. Anyone could tell you such products were a high risk. By definition they appeal to people who are less financially secure. In addition, with the rapid move away, in the mid-1990s, from endowment mortgages marketed so aggressively in the 1980s, anyone would have advised you to avoid any mortgage which did any more than help you secure your house. Of course, in an economy which I have highlighted time and time again emphasises house purchase as the means of effectively becoming a citizen and making any provision for your future security, of course there were people willing to gamble with such products. At the start of 2007, one out of five new mortgages were with it. The government could have been criticised for not restraining Northern Rock from pandering so greatly to this market or at least doing so with insufficient reserves and back up. In particular Northern Rock borrowed far more from the financial markets than its competitors and was far less wedded to actually how much people were saving with it, which in the past was the basis on which building societies operated. In 2005 the government decided the British economy could not tolerate the collapse of any of its banks and so it would have to intervene if one appeared to be in trouble which is why Northern Rock got £55 billion in loans and guarantees at the end of last year.

What the Conservatives and people in the financial sector want is for the government not to spend money assisting failing businesses and yet they do not want it either to impose regulation, they complain about the nanny state. What they want is to charge around making billions of pounds of profit and for ordinary people to lose their houses if the company makes a blunder. In a democracy the government cannot allow so many ordinary people to suffer and in an economy where housing is such a bedrock for other activity, really the bankers have to face the fact that however they feel about making the ordinary person pay it could wreck everything for them. I believe the government should have stepped in and having taken the decision in 2005 that it could not allow a collapse to have severely reined in the very risky behaviour of Northern Rock rather than allow them to make excessive profits for another two years that are now costing everyone dearly. We are not bailing out the ordinary borrower, we are effectively subsidising the income of incompetent bankers, they should be the ones to suffer.

Another problem is the death of mutual building societies. Mutual building societies were non-profit making credit bodies and this made them distinct from banks. As they had no share holders they could offer better terms and rates of interest but often lacked the facilities of things such as current accounts. In the wave of privatisations of the 1980s, from 1986 onwards building societies were allowed to turn themselves into banks. In 1989 the Abbey National was the first to change to a bank and most other building societies made the change in the following years, in many cases because those with accounts got a pay out of a couple of thousand pounds at the change over. In 1995 the Cheltenham & Gloucester Building Society became a bank and was aborbed by Lloyds Bank, the first time a converted building society had been so taken over. A milestone occurred in 1997 when the largest building society in the UK, the Halifax became a bank. All building societies after 1986 could act like banks with the types of accounts and other products such as insurance that banks offer, it did not mean they had to stop being mutual to do that, it is just as with all privatisations, people wanted short term gain at the expense of the economic stability of the UK.

Now there are very few mutual building societies, the Nationwide (with 10 million customers; £75 billion in assets in 2004) is the largest. Ironically many of the remaining mutuals have characteristics of the first building societies in being focused on a region especially in northern England. However, being mutual does not mean they are not commercially successful: Coventry Building Society (1 million customers: £9 billion assets in 2004), Leeds & Holbeck (8th largest building society; 600,000 customers; £5.3 billion assets 2004), Newcastle Building Society, Britannia Building Society, Skipton Building Society, Scarborough Building Society, Nottingham Building Society, Buckingham Building Society are the others (Leeds, Holbeck, Skipton and Scarborough are all in Yorkshire in North-East England; Coventry and Nottingham are old industrial towns in the Midlands). Not being driven by shareholders who want profits and good returns on their shares rather than their savings, distorts the policies that 'bank' building societies adopt. Everyone who has an account in a mutual building society is effectively a share holder and votes at the general meetings. This means they can stop the building society being taken over by people focused on a quick return and keep it on track with doing what building societies are supposed to do which is providing well founded credit to its members primarily to buy houses. If Northern Rock had not become demutualised in 1997 I doubt it would have got to the situation it is in now.

The other thing is about nationalisation. Nationalisation is the government taking anything from a majority share holding to total ownership of a company. There is a whole range of models of how nationalised industries can be run, but in the UK we tend to do it at 'arm's length' leaving business decisions up to the boards of the nationalised companies and often not compelling them to fit in with broader economic plans for the country. This contrasts sharply with other countries who have a so-called 'mixed' economy notably France which used nationalised industries to shape and stimulate the economy after the Second World War. Weaknesses in nationalised industries in the 1970s, mainly because they were heavy industries whose time had passed in Western Europe anyway, tarred the approach with a negative view. In addition, the British government seemed to put poor business people in charge of these companies, mainly because competent business people have no patriotism at all only personal greed and want ridiculously high salaries that governments cannot afford. In the 1980s-90s all the nationalised industries in the UK were privatised generating huge profits for already wealthy people and leaving us with poorly run, fragmented industries such as all the railway and utility companies which I often complain about.

Nationalisation is most associated with Labour governments but was started even before the Labour Party existed in the UK: effectively the economy of India was nationalised in 1857-8 when it was taken over by the British Government from the control of the East India Company; 1875 - Suez Canal Company, 1916 - parts of the alcohol business, 1926 under the Conservatives electricity was nationalised, 1927 - again the Conservatives - British Broadcasting Corporation (BBC) - state run radio and television body set up (the BBC was only a 'Company' for some months in 1926 despite what a lot of novelists and historians write in their books), 1933 - National Government (a coalition dominated by Conservatives) - London Transport, (1938 - the royalties from coal, the industry was not nationalised until 1946), 1939 - National Government - British Overseas Airways Corporation. Between 1946-51 the following industries were nationalised: coal, Bank of England, electricity, Cable & Wireless, railways, canals, Thomas Cook & Co. (travel agents), road haulage, hospitals, gas and steel. All former owners were bought out, the companies were not seized the way they were in Communist countries. At its peak only 20% of the economy was nationalised, but the focus was on the so-callled 'commanding heights' things which were handled best with a national perspective and which could direct the rest of the economy in healthy directions. However, unfortunately, they were left too free and there was no overall plan for the economy. Though it is interesting to think as a 'what if?' if things like coal and the railways had remained fragmented how much worse the British economy would have been in the 1950s and 1960s given how poorly especially coal had been run before the war. Similarly with only private hospitals the productive health of the country would have been much poorer. Even Winston Churchill, the Conservative leader defeated in 1945 had had plans for nationalisations in line with what the Conservatives had done in the 1920s and 1930s.

The problem is that from about 1967, when steel was nationalised for a second time (it had been privatised in 1953) onwards nationalisation was about saving companies on the verge of collapse, such as Rolls-Royce engines in 1971, British Leyland cars in 1976 and a number of collapsing aerospace and shipyard companies in 1977. The bulk of these companies were beyond saving and to some extent they were taken over to slow the loss of jobs. However, they weighed down the government's expenditure and suggested that nationalisation in itself was bad. There was no attempt to really use them to stimulate the economy. Under Tony Blair the government shied away from anything that seemed to associate his regime with what was deemed 'Old Labour' attitudes and instead encouraging the 'fat cat' capitalists who as we know actually now run the country. The trouble is if nationalisation is always really about a rescue package then it will always fail. The government should have taken over Northern Rock in 2005 and used it to begin stabilising the housing market and to some degree regulating house prices by example. Northern Rock was taking about 20% of new business so by say limiting the lending, then house prices could have been reined in without sending them into collapse and houses would still be within the reach of more people. Of course the capitalists do not want the risk of nationalisation hanging over them, it annoys them when they cannot allow their greed to run unfettered through the lives of us ordinary people who count for nothing in their books except how much we can give them in terms of fees, our happiness is nothing in their excessive Social Darwinist economic view. Nationalisation will always fail when it is used as the last resort. Capitalists need to pay for their blunders and greed, however, not us. It is clear from the British Gas results, a five times increase in their profits their year and a 15% increase in their prices, that we are being bled dry for the insatiable greed. There is clearly a cartel between the 6 energy providers in the UK with no more than a £13 difference between the most expensive and the cheapest, and yet no-one is willing to nationalise fuel provision nor even to enact anti-trust laws of the kind the USA has had for ninety years. Utilities and the railways need to be nationalised now and not when one of the greedy companies loses its profits gambling with our interests.

The government could have acted faster on Northern Rock, but its biggest failing is to be unwilling to rein in even to the slightest degree the greedy billionaire parasites of the British economy.

P.P. On reflection, I realised that my sense that I was moving in an anti-capitalist direction was unfounded. No-one would have accused Clement Attlee or Herbert Morrison or Harold Macmillan of being anti-capitalist and what I am advocating is nothing different to the lines they took on having a mixed economy. In fact it can be argued that it would be a more efficient form of capitalism than the current pattern in which equity funds are simply stripping away assets from successful businesses (Pret-a-Manger is currently in line to be abused) for the greed of the super-rich. Directing business people to act in a responsible way with concern for the rest of the system in which they are operating will actually sustain capitalism, otherwise in a couple of decades there will be no businesses actually producing products or services and equity funds simply fighting to eat each other up. Putting the 'commanding heights' of the economy into state control allows other policies to be pursued such as those around green issues like efficient use of fuel and recycling more effectively than regulations and fines.

The trouble is we keep being told that the economy of the super-rich unfettered by any regulations or concern for the 99.9% of the population who are not super-rich, is the only acceptable form of capitalist economy, that is rubbish and people who are pro-capitalism need to challenge that portrayal.

The Death of 'Democratic' Capitalism

Many people would argue that capitalist economies by definition are exploitative. That they rely on comparatively cheap labour to produce items to sell to consumers who are generally the cheap labour themselves and their pay is kept at a level which is only sufficient to allow them to buy those things in the long-run and not to advance through accumulating their own wealth so they can establish their own exploitative businesses. However, for most of the 20th century and certainly following the Second World War, there was a gradual movement away from that crude form of capitalism towards something more tempered. Most visibly we saw the evolution of welfare states across Europe which meant that by the 1960s most people were guaranteed housing, schooling, health care, public transport, etc. which allowed them to accumulate enough to allow them to enjoy things like holidays and consumer goods. This in turn boosted the consumer industry and capitalists found it was quite a good idea to keep this going especially as heavy industry began to decline in the 1970s and the service industry sector boomed. In the UK it is now sustained by credit rather than decent salaries, so is pretty fragile, but elsewhere in Europe and other industrialised parts of the world it is still roughly in place. The Communist states provided the basics for their people but had very little to offer in consumer items and with the fall of Communism they gave up the basics in return for opportunity to have access to such consumer items, and even more sharply than in the West, those who could get access did well, those who could not (the majority) were worse off, hence the continuing popularity of the Communists in the post-Communist countries as after the First World War.

As the Italian historian Donald Sassoon (see 'One Hundred Years of Socialism: The West European Left in the Twentieth Century' (1998)) who has spent his life looking at Socialism, has argued, actually more things that Socialists aim for such as health care, education, care of the elderly, decent salaries and working conditions, etc. are not achieved when capitalism is in crisis but when it is booming. I have termed this 'democratic capitalism' in that while consumers and workers are still effectively exploited, they also receive protection from the worst fluctations of the capitalist economies. In addition, there is an element in this 'democracy' which tends to get overlooked. The workers and the big capitalists are the usual focus of commentary on our economies, but I would argue, that those who make the jump and stop working for someone else and begin running their own business are also a characteristic of that democratic element. In the same way one would contrast say a monarchy in which only members of the royal family could run the country with a democracy where, in theory, anyone can be elected prime minister, and also take up many other lower positions locally, regionally and nationally to which they would have no access in a monarchy or a dictatorship. In the UK small business people gained this right gradually from the the 18th century onwards and while it took time for such people to be accorded anything like the access to influence that big businesses (especially those based on land) had, by the 20th century they had clearly won it. Thus, I see the ability of people to turn from workers to running small businesses as a further element of the democratic capitalism we once had. Of course many business go bust and these people return to the workers, but like someone who loses an election, generally they can try again.

So, you might be thinking, well this is a common example of capitalism with big business, small business and employees, with protection for those people who need it. However, I am arguing that such a form of capitalism is now dead and that we have almost reverted to the unfettered capitalism of the mid-19th century which meant the rich were immensely wealthy and the bulk of the population lived vicariously; in addition, the rich shaped all governmental policy and behaviour and anyone beneath them had no power. In addition, the ability to make the jump from worker to small business person is being crushed by the all encompassing corporations. In 1996 Michael Heseltine when Deputy Prime Minister (1995-7; he had been Secretary for Trade & Industry 1992-5) advised large companies effectively not to settle their bills to small businesses knowing that once they collapsed they would not be liable for the debt. This came from a leading Conservative and the party was supposed to be the one that backed business people whatever their size. Heseltine of course had become a millionaire at the age of 30 in 1963 so could be scathing of those struggling with small businesses. What this seemed to mark was a shift in the UK from backing any capitalism to backing the capitalism of the super-rich (or turbo-rich as they seem to be being called now). This was aided through the Thatcher years (1979-91) by selling off utilities which became very profitable businesses. On the surface this seemed to benefit small investors, but of course by the 1990s all their shares had been bought up by the big investment companies. Similarly encouragement to allow people to buy their council houses seem to be the democratisation of house ownership, but in fact with the slump of 1990-3 engineered by Thatcher's government and that of her successor John Major (1991-7) they lost control of these to the hands of multi-property owning landlords who rose to be millionaires too. Thus, the 1980s and 1990s saw the squeeze put on those people who would normally have been rising capitalists in favour of the richer.

Of course, Thatcher also ran through the welfare state stripping it of funds, making people feel guilty about using it and blaming anyone who did (which is one reason why millions of pounds of benefits go unclaimed each year), banning councils from building social housing, wrecking union rights, forcing public sector jobs to go to private companies paying the lowest wages, not allowing pensions to rise with inflation and so on. She did a very good job of stripping away so much of the safety net that had taken decades to construct. This is why the UK saw the rise of the underclass who have dropped out of society that no longer makes an effort to support them. Pressure on ordinary people came from many directions. I have noted how invidious the utility companies are and just today are reports about the percentage of poor families with children who cannot afford to heat their homes properly. Due to the use of metered utilities poor people actually have to pay more for their fuel than rich people, the same goes for food as they cannot access out-of-town stores that have the cheaper food; they cannot get bank loans and even legitimate loan companies can charge quite legally many times as much interest as those richer people can access. Thus, the system is engineered in the UK that once you have fallen into the poor category you are never going to get out. Increasingly, nor are your children, as schools become more selective, and as I have noted in previous posts even intelligent poor children fall quickly behind at school, they are condemned to live the same lives as their parents, however hard they might work. Due to the attitudes fostered in the 1980s such people are made to fill guilty and portrayed to the rest of us as lazy and deserving of their situation. Every class has lazy people in it, but poverty is an incredible motivator and I believe the greatest scroungers are among the rich.

So, for over twenty years, Britain has been moving to a less democratic capitalism, in which those who have least ability to pay are paying more. This was shown most sharply by the so-called Community Charge (better known as the Poll Tax) introduced to Scotland in 1989 and to the rest of the UK in 1990 and scrapped in 1993 following some of the most severe civil unrest the UK had seen for almost a decade. This tax was deemed 'fair' because everyone in a district no matter what they earnt paid the same amount to live in a house or flat in that district no matter how scummy or luxurious the property was or if they just rented one room in a house or had a whole mansion to themselves. About 1 million people disappeared from records overnight as they sought to avoid being stung by this tax which made up much more of your outgoings if you were poor or if you were rich. Even now in a borough like Tower Hamlets (small but densely populated, in East London) there are 60,000 (out of a population of over 200,000 people) fewer on the census register than registered with local doctors, because of the lingering fear of being found, despite the shift to the Council Tax which is based on property size.

Despite this steady erosion democratic capitalism it has now entered a new phase going beyond even the rich of the past. Even they are weak in the new set-up. This has been highlighted in a new book 'Who Runs Britain? How the Super-Rich are Changing Our Lives' by Robert Peston (2008) which though apparently flawed, highlights how that the people who run the UK are these so-called 'turbo-rich', going beyond the plutocrats of the past in their wealth and power. Of course Thatcher laid the ground for this by scrapping restrictions on taking capital generated in the UK out of the country, though this was simply jumping the gun as the EU insisted on it for all member states by 1990. Now, if a wealthy individual dislikes the government's policies they can simply threaten to shift some of their wealth elsewhere. Apparently, according to Peston the 1000 most wealthy people in the UK (out of a population of 62,000,000) owns £360,000,000,000 (€496 billion; US$716 billion) equivalent to 50 times the economy of Uruguay; roughly the same as the economy of Taiwan or Indonesia (which are the 20th and 21st richest countries in the world; about £10 billion more than even oil-rich Saudi Arabia in 22nd place). Beneath this 1000 must be many more billions owned and think of this replicated across the USA, Germany and Japan. In past postings I have referred to a map which showed the percentage of people living in various parts of the UK who were wealthy enough to be exempt from the norms of social behaviour. These 1000 people are rich enough to be exempt from the norms of government behaviour. They can murder people, make them disappear, drive them out of their homes and business and no-one can stop them.

You may say, well there have always been the rich. What is worsening the situation is the permitting of things like equity funds which simply buy up successful businesses and then load them with debt like a parasite draining their host rather than allowing that business to grow, pay better wages and employ more people. The richer you are the smaller a percentage of your income goes on tax. Multi-national companies learned this as early as the 1910s with oil companies leading the way. Peston claims that the tax 'efficiencies' of the super-rich deprive the government of equivalent to the rest of us paying 5p in the £ (i.e. a 5% tax rate) and so equivalent to hundreds of schools, hospitals, houses, battleships, space rockets, whatever you want to spend it on. This is just what we lose through their tax fiddles. They have distorted the economy of the whole South-East of England as I have noted before, pushing the cost of housing out of the reach of the bulk of even well-off people, and because their friends in the Thatcher regime smashed social housing, people cannot fall back on that as they would do in the past. It is almost as if these super-rich want to rub our noses in the muck to show how deprived we actually are. They are further pushing into health care, prisons, the Post Office, all the utilities, places where we previous got a bit of leeway if were not that rich, or in fact just comfortable. It is as if it is not only their greed wishing to earn more than whole states, it is that they feel they have to get us back for the 20th century when they were pressed a little bit to contribute to the rest of the population who actually power the businesses that they suck money from. Now we are being told, you stepped out of line, accept your station, here is the whipping to remind you not to get cocky again, not to ask for a welfare system, but to fight with each other for health and a house and an education so that you have no strength and we can pay you as low as we like to.

This is what the New Right agenda of the mid-1970s was working to. It was put into action in the 1980s and 1990s in the UK and the USA effectively forcing other more reluctant countries to follow suit (now with Sarkozy in France even the last outpost of a welfare society is being dismantled) and the countries coming out of Communism to rush blindly down the same path. As I have noted before Bush has favoured the super-rich as his core constituency and has engineered wars on their behalf (I think they fear fundamentalist Islam because it does not support consumerism and Iraq was just about the oil supply and business opportunities anyway). In Britain Blair was too enamoured of the Thatcher image to challenge it and even courted the super-rich. Maybe a Labour victory in 1992 was the last chance to reverse it, maybe it was too late by then, it certainly is now.

So what is our future? Well, probably by 2030 we will look very much like 1830. The welfare state is crumbling so fast in the UK that free at point of need dentistry is all but gone and health care will follow. Schooling is increasingly segregated and opportunities increasingly limited. There will always be a few people who will break out, but increasingly it will be because they win the lottery or a talent show than through hard work. Optimism will be sapped from us, the sense that we can achieve, especially through establishing our own businesses, will be taken from us. We are returning to a kind of feudal society in which we remain in our place in society and the bulk of us get the basics we need to surivive at the sufferance of our suppliers. Once we become old or no longer useful we are discarded. I think if even Winston Churchill, the Conservative prime minister (1940-5; 1951-5) let alone the ministers of Clement Attlee's Labour governments (1945-51) would look in utter horror at beggars so numerous on Britain's streets. We are charging back to the Victorian era with the plutocrats farther reaching and more powerful than ever before.

Suddenly while writing this a quote came back to me which I managed to track down and now it seems eerily prescient. It was made in 1983 by Neil Kinnock warning the audience about what would happen if Margaret Thatcher won the election (which she did with a large majority). He was Shadow Cabinet spokesman on education at the time but went on to lead the Labour Party to defeat in 1987 and 1992. He was condemned as a 'windbag' but actually was more a old school speaker who used rhetoric in the way Welsh politicians of the past like Aneurin Bevan and David Lloyd George did, so was increasingly out of step with the 'sound bite' era rising in the 1980s. This, I think seems a classic and it may weaken my argument to refer back so far for a comment and to someone unsuccessful, but I do not think it weakens the warning which is probably even truer now than it was 25 years ago.

"... I warn you.

I warn you that you will have pain — when healing and relief depend upon payment.

I warn you that you will have ignorance — when talents are untended and wits are wasted, when learning is a privilege and not a right.

I warn you that you will have poverty — when pensions slip and benefits are whittled away by a government that won’t pay in an economy that can’t pay.

I warn you that you will be cold — when fuel charges are used as a tax system that the rich don’t notice and the poor can’t afford.

I warn you that you must not expect work — when many cannot spend, more will not be able to earn. When they don’t earn, they don’t spend. When they don’t spend, work dies.

I warn you not to go into the streets alone after dark or into the streets in large crowds of protest in the light.

I warn you that you will be quiet — when the curfew of fear and the gibbet of unemployment make you obedient.

I warn you that you will have defence of a sort — with a risk and at a price that passes all understanding.

I warn you that you will be home-bound — when fares and transport bills kill leisure and lock you up.

I warn you that you will borrow less — when credit, loans, mortgages and easy payments are refused to people on your melting income.

...
— I warn you not to be ordinary
— I warn you not to be young
— I warn you not to fall ill
— I warn you not to get old."

Property in the UK 7: The Housing Market Begins to Collapse

I mentioned in the previous posting that this was a bad time to buy a house in the UK and now I am going to outline the reasons behind that. Earlier this year I predicted that house prices in the UK were far outstretching the average income we would soon hit a period when prices would have to fall. Estate agents were unconvinced by this, but I am now being proved correct. In the UK people get nervous when the rate of increase of house prices simply slows so you can imagine how worried they are if they start falling as they have done for the past 3 months. For some reason buying a house is a key status activity that was particularly encouraged during the 1980s to the extent that now some lawyers will not represent you if you are simply a tenant (I have experienced this when trying to employ a solicitor and being turned away not because I could not afford their fees but because I was not an owner-occupier of a house). So everyone tries to buy a house, meaning demand especially in regions where there is work, is very high and house prices just keep rising and rising. This is exacerbated by familes fragmenting, more people living alone and the birth rate of the UK middle class rising for some reason. This year they reached a level that the International Monetary Fund (IMF) felt was 40% over-priced. Of course because so many people invest so much money in their property about 4-5 times more than their counterparts in France, Belgium, Germany, etc., they cannot afford to see the price fall.

Despite all of these factors there is a limit how far house prices can keep rising. People for some reason ignore their pressure on inflation which is wrong as the cost of houses also influences the cost of rents, house insurance and many other house-related factors. To reduce inflationary pressures the Bank of England has used its only economic tool and has repeatedly raised interest rates this year. However, its governor feels inflation is still too high and so rates may have to rise further. For the first time in decades in the UK people have started looking beyond interest rates to manage the economy and there have been murmurs of other credit controls, and though for a couple of months some credit cards were restricted with the retail sector apparently weak, these have been lifted again. The threat of such controls is enough to unsettle consumers. All of this stuff has come far too late. If it had been introduced gradually after the last serious dip in the UK economy in 1993 or even when Labour came to power in 1997 it would all be well-established now, to bring it in now abruptly is just going to be a shock to the system.

So we have a situation of the worst of both worlds. Interest rates are rising making repayment of mortgages harder and yet house prices are dropping which means people cannot rely on selling their house at a hefty profit in order to cover the costs of the money they borrowed on it. You can see why I am personally worried. I have over-paid on my new house, under-sold my old house and have cleared out my savings just at the time when the market is turning to slump. Look forward to a nice blog of a man with negative equity (i.e. owning more on the property than the property is worth in itself). This happened all over the UK in 1990-3 and is clearly going to happen again, I guess in the next 12 months.

The UK's addiction to every rising house prices and the Major, Blair and Brown governments' lack of imagination in terms of economic tools and lack of courage in adopting and applying them is going to condemn the UK to a cycle like this at least every 15 years, maybe more regularly, depending on how far the upcoming slump takes prices down this time. It impinges on the middle class whose wealth and in turn their consumption is based on their property often rather than their incomes (which have been rising far slower) and so a crisis in housing will mean an immediate retail crisis as we may already be seeing as people tighten their belts (even at Christmas when they usually spend the most). It impinges on the working class as well, as those who own property will suffer like their middle class counterparts but also as landlords/ladies either raise rents to cover increased interest payments or sell off unprofitable rental property (as I have experienced) so reducing the availability and raising demand and so rents as well. In addition, those working in the retail and transportation sectors will suffer from retail lay-offs and reduction of business and those in the small-scale building tray, eventually from the decrease of people wanting work on house (though this may be balanced in the short-term by people improving their houses in an attempt to increase prices).

My advice is do not try to buy a house at the moment, wait for prices to fall next year. Pay off as much of your mortgage as you can (most now permit over-payments these days) and tighten up on Christmas gifts, especially those bought on credit. If we batten down now there may be some funds left to benefit from the post-slump recovery when you will be able to snap up reposessed houses (though banks these days tend to sit on them until they can be sold at a set level, often above the prevailing average price in the district - another aspect which has pushed prices upwards, rather than disposing of them cheaply as they did in the 1980s and 1990s). Though I could see the problem on the horizon, because of other human pressures I have been pushed right into the trap and am anticipating that it will be a couple of decades before I return to the level of prosperity I once had; I also anticipate I will not be an owner-occupier for long and that I will lose my house to repossession in about 2 years' time so will be back in an even more cutthroat rental sector very soon.

Property in the UK 1: An Obsession

Anyone living outside the UK and lots of us here find it difficult to understand why the British are so obsessed with owning a house. Partly it is because the way you are viewed especially by banks and estate/letting agents is very much shaped by whether you own your house or not. In the 1980s Prime Minister Margaret Thatcher won a lot of support by allowing council tenants to buy the houses they lived in and since then the whole demand for property in the UK has gone mad. Aside from a crash in prices 1990-3 the cost of properties has just kept on rising and so it is a far better investment in the UK than any bank or shares or anything. This has fuelled even more buying and even more price rises as people 'buy to let', i.e. a house they are not going to live in, just to rent out. Even if they do not get tenants the value will have risen about 10% per year depending on what area it is in. The British live primarily in a narrow corridor from London North-West to Liverpool and so demand remains high especially in South East England.

The main difficulty is that salaries have not matched house price rises. The average salary is around £23,000 per year (€33,580 or US$46,000) and yet you can easily pay £189,000 for a 2-bedroomed flat, more in London (where the average salary is admittedly £30,000). 80% of the population earns less than the average salary as it is distorted by the numerous millionaires in the UK. Banks previously would only lend you 3.5 times your salary so an average of £80,500, not nearly enough to get a flat even if you have a partner. So they now have 57 year mortgages and such like and the prices still keep rising.

Now you might ask: what is the problem? Just rent. Well, in the UK in contrast to other countries in Europe, tenants are seen as second class citizens and as I will outline later, that is a licence to get swindled and over-charged by anyone who fancies. In a country where status is so important it is very uncomfortable. I know it comes nowhere near prejudices suffered by millions of people, but it is an element in British society. It also makes the country unresponsive to change. You cannot have the regional shift for example, along the lines that West Germany saw in the 1980s when work moved from the North to the South of the country. Rents were higher in the southern cities, but not 3-4 times higher which is the difference between the cost of the same type of house in southern England compared to northern England, Scotland, Northern Ireland, etc. Ironically, the Conservative Party which told the unemployed to 'get on their bike' and find work, made that almost impossible. In addition the fact that property rises in value so quickly means that places such as the London borough of Ealing, have thousands of empty properties when families are desperate for accommodation. This has been improved by councils charging council tax on empty properties for the last couple of years, but more needs to be done, especially in high demand areas, to follow initiatives of US cities in getting empty property into use. More competition and a fall in house prices will have a knock on effect on rent. In some parts of southern England this has risen 20% in the last 18 months and the Bank of England wonders why it is having problems slowing down inflation despite the falls in grocery and consumer good prices.

Despite the longer mortgages and the better terms there is going to come a day, probably very soon when there are going to be insufficient people who can afford to buy a house and then there will come a slump. As in 1990-3 this will hurt the property owners, but at least it might mean more people will be able to afford somewhere to live and large enough to accommodate them. It might be better in the long run to shift to a situation as in the rest of Europe in which tenants have better rights and are not seen as scum. There has been a good step in this direction this year, but it will probably take the next decade to shift and British attitudes take even longer to change, but change they must. I suppose the bulk of Britons are not interested in an inclusive society and actually relish its divisions, but as you can tell it is something that exercises me, so there.