How the destruction of industrial Britain casts a shadow over present-day public finances

A new report by Christina Beatty and Steve Fothergill, Centre for Regional Economic and Social Research, Sheffield Hallam University

  • UK manufacturing employment has fallen from 8.9 million to just 2.9 million overthe last fifty years, and 500,000 jobs have disappeared from the coal industry. This has destroyed the economic base of many communities, especially in the North,Scotland and Wales.
  • The main effect ofthis job loss has been to divert vast numbers of men and women out ofthe labour market onto incapacity related benefits, these days Employment and Support Allowance (ESA) which accounts for almost 2.5 million adults of workingage. The highest claimant rates – 10per cent or more of all 16-64 year olds – are nearly all in older industrial areas.
  • ESA and the additional benefits received by ESAclaimants – Housing Benefit and Disability LivingAllowance for example – are a £30bn-plus annual claim on the Exchequer.
  • Low pay in former industrial areas depresses tax revenue and inflates spending on in-work benefits. Spending on Tax Credits, for example, exceeds £850 a year per adult of working age in much of older industrial Britain – double the level in parts of southernEngland.
  • The Treasury has misdiagnosed high welfare spending as the result of inadequate work incentives and has too often blamed individuals for their own predicament, whereas in fact a large part ofthe bill is rooted in job destruction extending back decades.
  • The welfare reforms implemented since 2010, and strengthened since the 2015 general election, hitthe poorest places hardest. In effect, communities in older industrial Britain are being meted out punishmentin the form of welfare cuts forthe destruction wrought to their industrial base.
  • Across most of older industrial Britain the loss arising from welfare reform is expected to exceed £750 a year per working age adult by 2020-21.
  • There is an alternative – a genuine rebalancing ofthe economy in favour of industrial production and a revival of regional economic policy.
  • Policy makers need to take a long-term perspective, look at the differences between places, and stop thinking in silos.

Continue reading

Poor growth and/or increases in inequality owe as much to global forces as domestic policies

Note two things here. First, there are a lot of dots with very low income growth, low enough to deserve the label “stagnant”. Second, wherever similar-coloured dots are on an upward slope, higher-income groups left their lower-income compatriots behind. Aside from the very lowest deciles (who are often cared for with welfare benefits), that very often seems the case. Again, Lakner and Milanovic looked into this, and wrote: “Some examples with particularly low real growth rates among rich economies include almost the entire lower halves of the income distributions in Austria, Germany, Denmark, Greece and the United States. They all had overall 20-year growth rates of less than 20 per cent which translates, in the best case, as 0.9 per cent per capita annually.”
Continue reading

Real wages in the UK have fallen by more than 10 per cent

Real wage change (%) Employment rate change (percentage points)
Greece

-10.4

-9.0

UK

-10.4

0.6

Portugal

-3.7

-5.4

Italy

0.9

-2.3

Czech Rep

1.1

1.0

Ireland

1.6

-7.9

Spain

2.8

-8.5

Netherlands

3.4

-1.7

Denmark

4.0

-3.2

Lithuania

4.3

5.5

Israel

4.3

1.9

Finland

4.3

-3.8

Belgium

4.4

-0.7

Japan

4.7

2.6

Latvia

4.9

-3.0

USA

6.4

-3.4

Austria

6.5

1.2

OECD average

6.7

-0.6

Slovenia

7.2

-4.3

Australia

7.2

-0.7

Hungary

9.3

5.9

Canada

9.4

-1.7

Sweden

10.1

-0.7

France

10.5

-1.8

Luxembourg

11.1

-1.2

Switzerland

11.3

0.5

Slovakia

12.3

0.9

Estonia

13.4

2.2

Germany

13.9

5.1

Poland

23.0

4.5

Continue reading

The effects of poverty costs the UK £78bn a year

The Joseph Rowntree Foundation (JRF) estimates that the impact and cost of poverty accounts for £1 in every £5 spent on public services.

The biggest chunk of the £78bn figure comes from treating health conditions associated with poverty, which amounts to £29bn, while the costs for schools and police are also significant. A further £9bn is linked to the cost of benefits and lost tax revenues. …

The JRF report, called “counting the cost of UK poverty”, estimates that 25% of healthcare spending is associated with treating conditions connected to poverty.
Continue reading

Resolution Foundation: Why did we vote to leave?

There are six key takeaways.

First, living standards matter. Reflecting on the results three weeks ago, we noted that recent changes in living standards hadn’t played much of a role – despite the contention that people were angry about the post-financial crisis squeeze on living standards – but that deeper rooted economic differences did. That finding is confirmed in our more detailed investigation, with employment levels proving the indicator with the strongest link to tendency for an area to vote Leave. A 10 percentage point (ppt) rise in the employment rate within a local authority is associated with a 1.7ppt fall in the leave vote. Areas where high numbers of people are out of work voted to leave.
Continue reading

Brexit reading list

‘If you’ve got money, you vote in … if you haven’t got money, you vote out’

Brexit Is Only the Latest Proof of the Insularity and Failure of Western Establishment Institutions

We can’t leave the negotiations with Europe to the Tories

Labour is partly to blame for the racists’ capture of the EU debate

A farmer’s guide to Brexit

It’s NOT the economy, stupid: Brexit as a story of personal values

The Tory leadership election is a sort of X Factor for choosing the antichrist

John Harris’ Progressive Alliance speech

Why did we vote to leave? What an analysis of place can tell us about Brexit

Britain’s Limited Options

Right-Sizing The Financial Sector In Post-Brexit Europe

How David Cameron’s Plan To Screw Labour Cost Him The EU Referendum

Reversing Brexit

At which step do you think that this whole ‘Brexit’ farce will collapse?

A response to Paul Mason’s ‘Labour: The Way Ahead’

Labour is stuck but the people who want to leap to a new politics are scattered across the party

Austerity is the cause of our economic woes. It’s nothing to do with the EU

 

 

Brexit: ever growing economic inequality and the public spending cuts that accompanied austerity

The outcome of the EU referendum has been unfairly blamed on the working class in the north of England, and even on obesity.7 However, because of differential turnout and the size of the denominator population, most people who voted Leave lived in the south of England.8 Furthermore, of all those who voted for Leave, 59% were in the middle classes (A, B, or C1). The proportion of Leave voters in the lowest two social classes (D and E) was just 24%.8 The Leave voters among the middle class were crucial to the final result because the middle class constituted two thirds of all those who voted. Continue reading