Thursday 16 January 2014

The real source of the middle class crisis

I went to a school reunion recently. We are middle-aged, middle class survivors, in a sense. Some of our fellow public schoolboys from the 1970s have died. One or two have even committed suicide, but we are still around, largely happy, not always thriving, but settled.

What is most unexpected about the small group of us who meet once a year, upstairs in a bar in London’s Covent Garden, is how diverse we are.

There are two builders, a furniture restorer, a very successful barrister, a medical consultant, an alternative health therapist, and a writer (me). There is also a garage owner, a fireman, an undertaker, a sales director, and an engineer, among others.

We spent our whole schooldays being told how privileged we were, and we were certainly privileged in many ways – most of us own our own homes, though not all of us. 

But if you believe the rhetoric about independent schools, on either side of the political divide, you might have expected us to have been more of a predictably cohesive group.

But we have certainly benefited from the age we lived in, from free university education and student grants, and from inheriting the first staggering rises in house prices from our parents. We have trained as professionals in the days when they had some freedom of manoeuvre, before the combination of McKinsey and Goodhart’s Law.

We don’t talk about money much – we are too middle class for that – and our incomes clearly vary enormously (one of us has even retired). But we are not the narrow slice of the class system you might have predicted. 

We seem actually to straddle a huge variety of different kinds of middle classes, but we all worry about our children, and their ability to survive in the world that is emerging, here and abroad.

Those of us who are tolerant of getting into debt, especially property debt, seem to have inherited the world. But even they seem unlikely to pass it on to their children, who will struggle against an emerging middle class almost twice the size of what it is today around the world. 

 It is strange that our secondary education should have taken place with a background of the Three Day Week, the Energy Crisis and the virtual collapse of the UK economy – yet we have been on the winning side for most of our lives. 

At the same time, when the nation is incomparably richer by conventional methods, our children’s lives seem likely to be seriously constrained. But for different reasons.

The middle classes in the struggling northern England have their problems too. The unbalanced economy, which seems to get more unbalanced with every month that passes, has sucked the enterprise out of the north, leaving it with a constrained, shrinking public sector. 

The middle classes can afford to rent or buy, but their professional room for manoeuvre is serious constrained, and the enterprises, the local papers, local banks, local food distributors, local shops, local abattoirs, which gave previous middle class generations an economic underpinning, have gone.

In the south, it is the other way around. There is work, but it struggles to pay enough to buy or rent because the housing market is increasingly geared to the needs of foreign investors and the mega-rich.

And here we get to the nitty-gritty. Because, behind all the headlines and soundbites, it is increasingly difficult even for middle income earners in mainstream work, including ever larger chunks of the middle classes, to get by without support from the government in the form of Help to Buy, or housing benefit or council tax rebates or tax credits or all the rest of the state’s generosity to its middle income earners.

Their children are living at home, their pensions have been corroded by the financial services industry. But political parties need the middle classes and they tend to hide these problems away by subsidising home ownership – even though it pushes up prices for our children.

What is actually happening is that everything we thought of as the mainstream economy is being pushed to the margins, often subsidised by taxpayers. 

 Energy prices rise as the big utilities extract the benefits of monopoly (and the French and Chinese take their nuclear subsidies), because successive governments wasted the earnings from North Sea Oil. Public services become increasingly unaffordable as PFI investors extract the results of successive governments’ determination – at whatever cost – to take investments off their balance sheet. 

Other monopolies make best use of the UK’s bizarrely forgiving corporate tax regime to move whole sectors offshore, as Amazon has done for the book market.

So when Ed Miliband suggests that Labour can save the middle class, he needs to re-think many of the economic assumptions of the past three decades.

Maybe he will. Or maybe he is just using the issue to flag up a kind of ‘all-in-it-together’ rhetoric. Either way, the usual combination of so-called middle class issues – around more childcare, better teaching and help with home ownership – are not nearly enough. 

The traditional Labour solution – Fabian welfare for the middle classes – are not adequate to the problem.

What can we do instead? Well, to find that out, you might just have to read the new improved, updated and affordable edition of my book Broke: How to Survive the Middle Class Crisis, published today...

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