Heroes: It’s not the economy, stupid, it’s inequality 

 

‘May you grow up to be righteous 

May you grow up to be true’ 

 
Last week, amid much fanfare Labour unveiled their 6-priorities. Reading it, I had two immediate reactions, this is all obvious, and it’s little different to the Tories, but then that is what Labour have become; Tory lite. 

Hopefully, Labour will be a less chaotic administration, thus leaving them better able to deliver marginal improvements, but I don’t see any ‘solutions’. 

There is nothing that addresses the real issues, such as productivity, little, or no manufacturing industry, no real plan, an NHS that is overstretched, understaffed and all consuming, and the housing shortage and planning chaos. 

The average property price in the UK is C>£260k, roughly 7.5x times the £35,000 average national salary. The average price of a London 2 bed flat is now £800,000, only 18 times the average £44,300 London salary!  
 

‘No wonder the City is starting to resemble a ghost town’

 
No wonder the City is starting to resemble a ghost town and we are being asked to fund regeneration projects there! 

This week we will once again turn our attention to the latest inflation data, which is expected to be around the governments 2% target, which, if nothing else, will give the Tories something to brag about. The number, whilst not meaningless, means that prices are still going up, only more slowly, and does nothing to address the previous increases, especially for foodstuffs. The high levels of inflation and its impact on prices are now part and parcel of the economy. 

The question on peoples lips is when will the Bank start to ease rates. Inflation is proving more sticky than expected, and central banks now understand the risks of setting interest rates artificially low. Immediate rates cuts would do little other than add froth to already rising market, and serve only to further inflate the asset bubble created post the GFC. 

As I written so many times before this asset bubble has done nothing for business, and has served only to further exacerbate inequality. Economics aside, the political impact of this inequality has seen a rise of populism leading to Brexit, and the culture wars. 
 

‘the political impact of this inequality has seen a rise of populism leading to Brexit, and the culture wars’

 
Economically, the bubble has seen a deviation between financial assets and the real world of supply chains and consumer demand.  

The Real World is based around supply, the availability of stuff (what is necessary) to make the economy work. Whereas, the Financial World, comprised of traders, investors, yields and returns, everything is determined by demand – who will pay what for stuff. 

Supply is what drives the economy, without stuff you simply don’t have an economy or market.  

One of the consequences of inequality is the fact that C. one in three British children now live in relative poverty. Last week, the former PM Gordon Brown, referred to this generation as ‘austerity’s children‘: children who have grown up in families where money concerns are a constant toxic stress, with little, or no  financial cushion means, and where parents have to decide whether to eat or heat. 
 

‘one in three British children now live in relative poverty’

 
This destitution isn’t just caused by events, it’s a political choice the Tories made in 2010 when they introduced austerity.  

The numbers are awful;  
 

• Two-thirds of children living in relative poverty, defined as 60% of median income, after housing costs, are in families where at least one adult works, a product of the number of low-paid jobs in the economy.  
• Child poverty rates are higher in families where someone has a disability, and  
• 58% of children from Pakistani and 67% of Bangladeshi backgrounds live in relative child poverty. 

 

• >140,000 children in England are homeless, many living for years on end in temporary accommodation that does not meet the most basic of standards. 
• One in six children live in families experiencing food insecurity, and  
• One in 40 in a family that has had to access a food bank in the past 30 days. 

 
Obviously Covid has had an impact, along with the energy crisis and the rising cost of living, but the impact of government policy cannot be overlooked, put simply, consecutive Conservative chancellors have significantly reduced the amount of financial support targeted at low-income parents. Between 2010 and 2019, families with children in the poorest 10% of income distribution lost a net average of £4,000 a year, or 20% of their income, as a result of real cuts to tax credits and benefits, the benefit cap and the two-child limit on means-tested financial support for children.  
 

‘successive Tory chancellors literally took money from poor families with children and redistributed it to richer families’

 
At the same time, affluent households in the top half of the income distribution gained financially as a result of tax cuts. In effect austerity measure by successive Tory chancellors literally took money from poor families with children and redistributed it to richer families, initially with Liberal Democrat support. Since 2019, Rishi Sunak, then Jeremy Hunt, have prioritised delivering expensive tax cuts that most benefit middle and high earners over addressing child poverty. 

In addition, successive governments have also failed to address the housing crisis that has left the UK with some of the highest rents in Europe and an under-regulated private rental sector marred by poor-quality housing and insecurity.  

Longer-term, austerity’s children are in a doom loop; ‘evidence shows that growing up in poverty blights a child’s life chances long after they reach adulthood, affecting everything from long-term health to employment outcomes: tolerating poverty bakes in a cycle of disadvantage that hurts generation after generation.’ 
 

‘austerity’s children are in a doom loop’

 
It is truly appalling that a former PM is having to point out what todays politicians are blind to. Their should be no place for tax cuts in a society that seems unable to afford to restore financial support for low-income parents to 2010 levels in real terms. It is beyond my comprehension to understand how Jeremy Hunt can justify spending £65bn on cutting national insurance rather than addressing child poverty 

Most disconcertingly, child poverty didn’t make it into Labour’s top-6 last week. We all know that Starmer is treading an understandably cautious line in terms of Labour’s tax and spending plans in the run-up to the election. As a result they are ignoring one of the big moral issues of our time. In 1997 Blair made ending child poverty one of his governments priorities, nothing should have changed.  
 

‘Blair made ending child poverty one of his governments priorities, nothing should have changed’

 
Before signing off let’s consider the latest mess surrounding the Good Friday agreement. 

Readers may remember ‘The Windsor framework’, Rishi Sunak’s deal to settle problems with the way that Boris Johnson’s Brexit withdrawal agreement applied to Northern Ireland. This was Sunak’s  first significant achievement as PM,  probably his only one. 

The framework was based on Sunak embracing instead an ethos of diplomatic pragmatism, something he seems to have forgotten as his pledge to ‘stop the boats’ produced acts of parliament that defy the European convention on human rights, which happens also to be integral to the Good Friday agreement underpinning peace in NI. 

As a result his immigration policy has hit the rocks after a Belfast court ruled that sections of the 2023 Illegal Migration Act (‘the Act’) should not apply in NI. 

The basis of the Act is to remove any prospect of a successful asylum claim from the vast majority of people who arrive by ‘irregular’ means. With a few very narrowly defined exceptions, any refugee who crosses the Channel in a small boat is disqualified from ever settling in the UK.  

The high court ruled this arrangement to be a form of discrimination and a breach of human rights guarantees that – even if withdrawn in Britain – are still extended to everyone in NI under the Good Friday agreement, by way of the Brexit withdrawal agreement and the Windsor framework. 

This could mean that Northern Ireland becomes a potential zone of sanctuary for anyone who might be eligible for deportation to Rwanda, as there is a strong likelihood of a successful legal challenge to the recently passed Rwanda Safety Act, since that law is auxiliary to the Illegal Migration Act and builds on the same human rights violations. Moreover, it confirms fears among NI unionists that Brexit arrangements create a jurisdictional border in the Irish Sea, despite Downing Street assurances that no such schism would be felt. 
 

‘Northern Ireland becomes a potential zone of sanctuary for anyone who might be eligible for deportation to Rwanda’

 
It is reported that ministers were warned of this scenario, but chose to ignore them with the typical arrogance and irresponsibility that is a trademark of the current government. 

Of course the government will appeal against the Belfast, but this is just another example that no matter what the issue is the government’s incompetence shines through.  Rwanda was never a credible policy primarily because it prioritised gestural defiance of international norms over legal practicality was ill-conceived from the start. 

Sunak would have been much better using the £370m  wasted on his failed immigration policy to help feed the kids.  

Silly me, I forgot, they don’t count, they can’t vote! 

‘And these children that you spit on 

As they try to change their worlds 

Are immune to your consultations 

They’re quite aware of what they’re goin’ through’ 

‘This week we cover some familiar themes, such as inequality, austerity and child poverty. Whilst these are clearly the product of 14-yrs of Tory misrule and distorted priorities, they don’t seem to be on Labour’s agenda either. But, this shouldn’t be a surprise, Labour is no longer Labour, more a Tory tribute act.

As a result of this I expect to see Populism continuing to flourish, be that via Reform, a hard-right Tory party, or some bastardised hybrid. Something that seems to concern Theresa May, who used her speech at the Parliamentary Press Gallery to bemoan the rise of authoritarianism and anti-democratic populist leaders across the globe.

In her speech “Populism seeks to divide. It seeks to divide our societies and it seeks to provide easy answers,” the former prime minister said.

Whilst former cabinet minister Jacob Rees-Mogg would like to see a Conservative front bench with roles for Farage and the Reform UK leader Richard Tice, May said that was not the answer. “I absolutely disagree on that. I don’t think Farage is Conservative, I don’t think Tice is a Conservative.”

May also said she believed Britain should remain in the European convention on human rights, including as a bulwark against politicians breaching international law.

“Sadly we have shown as a country a willingness to row back sometimes on certain aspects of international law. I think we should stay in something that we helped to create in the first place.”

She also took aim at Liz Truss, saying her book should be in the fantasy section of the bookshop.

Hindsight is a wonderful gift but, on reflection, Theresa May was made to look a far worse PM by her party than she actually was. At the time, the European Research Group was out-of-control, a bunch of rabid dogs.

Whilst Johnson appeared to tame them he did nothing of the sort. Instead he capitulated and joined in the bun fight.

Today sees the report of the contaminated blood scandal that has been dragged on for years. Alongside the PO Horizon scandal, it is a blot on our history.

Both will be covered in the next article, with the added bonus of former PO CEO, and preacher Paula Vennell’s evidence to amuse us!

Lyrically, we focus on children, our future. I have long believed that our children should have an easier life than us, unfortunately, there are many in this country who seem to think more of themselves instead. We start with Bob Dylan’s “Forever Young”, and end with Bowie’s inimitable “Changes”. Enjoy! Philip.

@coldwarsteve
 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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