|Some considerations on political ideology
and the British search |
for prosperity for all its citizens
|Italian translation, French translation|
By John Baillie of Park Lane College, Leeds, UNITED
Contribution to the EDUVINET "Living Conditions of EU Citizen" subject
It was Margaret Thatcher who stated that 'there is no such thing as society', a statement which shocked many British people but which illustrates the values which underpinned the last Conservative government for 18 years in power. The UK, once considered the sick man of Europe now has a successful economy but who has paid the price? The gap between rich and poor has increased. The poorest in society have been marginalised or neglected. Five million people of working age live in houses where nobody has a job. Over one million people have never worked since leaving school. Crime has doubled. Many people consider they have no stake in society. Is this the right way and the only way to achieve economic success and to bring prosperity to the bulk of the British people? This paper attempts to consider some of the thinking behind these issues, the effect on living conditions and to put forward possible solutions.
2 The current state of the UK - a selection of statistics ( see SOURCES )
2.1 Population structure
2.2 Employment and unemployment
2.3 Cost of living
Householders in Northern Europe have a higher living standard in general
than those in southern Europe but there are regions and pockets of great
deprivation in the UK.
Social protection costs in the EU account for 25% GDP (1992)
Social protection expenditure has been increasing in all EU countries since 1980
Annual inflation is falling but is currently higher in the UK than the EU average (UK 2.4%, Germany 1.4%, France 0.9%, Spain 2.2%, US 0.1%)
Eu food prices rose 14% in the period 1990 to 1994
Rent, fuel and power prices remained unchanged in the UK (they doubled in Greece)
There are large differences in consumption patterns across the EU. Southern Europe has a lower level of consumption than northern Europe (UK is average)
2.4 Housing and families
The UK has 66% owner occupation
81% of UK households live in one family dwellings
The rate of house-building per thousand was lower in the UK in 1994 than in all other EU countries apart from Denmark and Sweden.
The UK has the highest divorce rate in the EU.
The number of doctors per 1000 people varies from 4.3% in Greece to 1.4% in
Ireland. 2.2% in the UK.
The NHS provides the best value for money in Europe in terms of health care.
2.6 Poverty , deprivation and crime
There are 18 million poor households in the EU in 1988 affecting 52 million
individuals 150000 people in the UK are homeless
In the UK 33% of young men under 25 are without jobs in inner cities.
60% of young black men in London are unemployed
The UK has a higher proportion of single parent families than anywhere else in Europe. 60% of lone parents are without jobs and 70% are dependent on income support. Lone parents headed 23% of all families with dependent children in 1994 (three times the proportion in 1971)
The UK has the highest total expenditure on unemployment benefit as a proportion of GDP (1.3%)
An increasing number of regions are among the poorest in the EU. Average income per head in the UK was £10270, the 11th lowest in the EU(1994). Merseyside has a per capita annual income of only £7700. The UK has the worst crime record in the EU.
2.7 Education and social security
In Belgium, France, Germany and the Netherlands around 90% of young people
aged 16 to 18 were in education and training in 1991/92. In the UK there was
72% (EU average 77%)
An estimated 100,000 children are not attending school in the UK.
Social security spending has doubled since 1979. It has risen from 9% of GDP to 13% in 1997.
Benefits for lone parents cost £10 billion each year. In 1995 two fifths of all social security benefit expenditure was targeted at elderly people
2.8 GDP per capita, trading performance and inward investment
UK GDP per capita is average in the EU (9th) but is growing faster than the
average at 3% year on year. (France 0.9%, Germany 1.4%, Spain 2.6%, Netherlands
2.1%, Ireland 10.1%, US 4.1% Source: European Newspaper June 12 1997) . The
economy has been growing faster than France and Germany for the last six years.
Industrial productivity has increased at twice the rate of Germany's.
There are wide disparities when GDP per capita comparisons are made region by region.
The UK is fifth in the world in international trade and exports more per head than the USA or Japan.
The UK attracts nearly 40% of all American and Japanese investment in Europe. It is the largest foreign investor in the USA.
2.9 Income and working conditions
Real household disposable income per head saw the highest year-on-year
increase of the 1990's in 1995 at 2.2% . Almost a quarter of employees earned
less than £4 per hour in Spring 1996. One in 12 workers earns less than £3
per hour. The EU average working week is 40.3 hours. The UK figure is 43.4 the
longest in the EU (Germany 39.9, France 39.7)
19.8% of full -time employees in the UK exceeded a 48 hour working week
The social costs paid by employers on top of £100 of wages are £15 compared to £31 in Germany and £41 in France
The basic tax rate is 24%. The higher rate is 40%. Taxes as a % of GDP are 10% lower than in Germany.
3 A summary of the broad influences which shaped the policies of the last Conservative government, a leading exponent of the 'competition' society and the effect of these policies on UK citizens.
3.1 Monetarism (Milton Friedman, Professor Patrick Minford, Ronald Reagan). The emphasis is that inflation must be restrained at all costs and that the control of the money supply must be the overall policy priority. There is an underlying assumption that there is a 'natural' rate of unemployment. The loss of jobs is a 'necessary 'price to pay to achieve long-tem economic progress because classical economic theory suggests that if unemployment is high, wages (and therefore inflation) will tend to fall. Monetarists firmly believed that the government should let market forces work unhindered.
3.2 Free trade and a rejection of all forms of protectionism or government intervention. The belief that competition and market forces would ensure the balance in supply and demand and production would then be driven by what people wanted. (Adam Smith, David Ricardo, John Stuart Mill). Also the USA is used as an example whereby massive tax cuts stimulated demand thus vindicating the demand policies of Keynesian economic theory.
3.3 Survival of the fittest. The Darwinian theory of evolution as applied to business. The belief is that if market forces force companies to close then this is inevitable and probably a good thing because intervention would simply postpone the inevitable. Only companies that adapt and change to meet global competition will survive, grow and create jobs.
3.4 'There is no such thing as society'. Individual advancement, entrepreneurs in business and short-term profit creation in companies is encouraged. Wealth creation is considered of greater value than a sense of concern or fair play towards others. Prosperity for all depends on individuals seeking their own advancement.
4 Policy initiatives in the shareholder society in the UK
4.1 Privatisation programme. State control has been massively and rapidly reduced eg electricity, gas, telephone, airports, railways. Thousand of jobs have been lost in once state owned companions but it is argued that public expenditure has been reduced, consumers get lower prices and the pace of change has accelerated.
4.2 Deregulation. The belief is that overregulation does not work because it increases business costs eg the Conservative government reduced the number of Health and Safety rules affecting companies by 40%. Deregulation also increases competition eg between banks and building societies . This belief underlies Conservative opposition to new legislation emanating from the EU.
4.3 Contracting-out. Services such as refuse collection by councils have been contracted out and open to tender by private companies. The belief is that this combines increasing efficiency with a reduction in public expenditure.
4.4 Labour market flexibility. The Conservative government believed that insecurity in the workplace motivates the workforce. The government resisted all measures to give part-timers the same rights as full timers or to introduce a minimum wage in the belief that these measures would cost jobs. The argument used is 'low pay or no pay'. If work is not available you should simply 'Get on your bike' to find it (Norman Tebbit, former Conservative Minister for Employment). There is no such thing as 'a job for life'.
4.5 Restructuring of business and industry. There was enormous structural change after the boom of the 1980's and two deep economic recessions. Terms used are 'delayering, cutting back, streamlining' - all of which mean redundancies. However, this has led to increased wealth for those in work, greater efficiency, 'lean and fit' companies and improved competitiveness of many UK companies.
4.6 Financial deregulation. The UK left the ERM, abolished all restrictions on the movement of capital and refused to be committed to the Single Currency. The financial sector is the fastest growing sector of the UK economy and the City of London is the world's largest financial centre.
4.7 Opposition to 'Europe'. The Social Chapter is considered to be the 'Trojan Horse' that would destroy the competitiveness of British industry. The Conservative election slogan was 'New labour, Euro danger' . The view was that the rest of Europe is living in the past and still thinking in terms of protectionism. Big business stated that the Social Chapter would place additional burdens on them and claimed it would destroy half a million jobs. During the election period politicians stirred up popular feeling against Europe claiming that the UK was in danger of losing its sovereignty.
4.8 Opposition to Trade Unions. The Conservative government produced a raft of legislation designed to curb trade union power. Unions have been derecognised, collective agreements torn up, bonus payments and wages cut, working hours increased. There has been industrial peace but the 'hire and fire' mentality has returned in some companies and the clock put back in industrial relations. The Conservatives claim that a major burden on business has been removed.
4.9 The USA was used as a role model rather than Europe. The USA is currently at the top of the table of the world's most competitive nations. Mrs Thatcher considered that there was a 'special relationship' between the US and the UK and turned her back on Europe.
5 A synopsis of the thinking behind the 'consensus' or stakeholder society.
5.1 Drawing more on Keynesian economic theory than on monetarist theory the assumption is that the market economy is not self-regulating and that government intervention is necessary to restore the imbalances. The results of markets can be improved and finance should be used to serve economic growth. An example of uncontrolled finance was the credit driven boom of the 1980,s followed by the deepest recession experienced in any European country. The underlying belief is that society's problems , both economic and social cannot be solved by economic growth alone.
5.2 The Conservative government believed that a society divided into 'haves and have nots' was a necessary price to pay to become competitive and appeared to believe that a low paid or workless underclass was part of the 'natural 'order. There was the belief that money given to the rich would cascade down to the poor but this did not happen. The result has been the growth of a dual society in the UK ( as demonstrated to a greater degree in the US). There is a lost generation of disadvantaged people - an underclass who are without hope and without a stake in society living off benefit or crime.
5.3 The EU has always supported the strengthening of economic and social cohesion through the impact of a range of funds and initiatives. It has never supported the view that long-term economic progress is possible without social cohesion. It had the effect of diluting the extremes of Conservative dogma and reduced the negative impact of the free market economy in the most disadvantaged regions and sectors of the population.
5.4 The idea of a stakeholder society draws heavily on the European Christian tradition and values. There is a growing awareness that moral values, social justice and humanity must not be sacrificed for the pursuit of wealth and that all individuals, communities and the Government have a responsibility towards creating a more caring society. These values remained dormant or stifled but when the opportunity arose the British public rejected the harsh, uncaring approach of the conservative government.
6 New policy initiatives
1 It is better to reduce non-labour costs of employers rather than cut wages. Loading social costs onto employers will cost jobs. National insurance, tax and social security changes can be used to encourage people to work.
2 The Dutch appear to provide a better role model for the UK than the US in that they appear to be succeeding in combining economic growth with social justice and low unemployment. The Netherlands has the world's highest productivity rate and the fastest-growing jobs market in the EU. Success has been achieved without extra government spending by consensus between both sides of industry and by the willingness to adopt flexible employment practices. Wages have been frozen in return for jobs and the working week has been cut.
3 Working practices are changing very fast and the urgent need is for higher standards of education and training in the work force. Targets for improved standards of literacy and numeracy have been set. Child care facilities need to be increased to make it possible for parents to work. Nursery education (patchy provision in the UK) should be introduced for all 4 year olds.
4 Share ownership gives employees a stake in the success of the company and can help business success
5 Despite Conservative opposition good companies have been introducing the improved rights and working conditions advocated in the Social Chapter. The momentum in the UK is now unstoppable.
6 Welfare reform is needed to resolve major problems. The benefits system penalises the husband or wife of an unemployed person who takes up a job. It makes couples better-off if they live apart. It locks people into dependence on housing benefit and income support. There is too little incentive to work part-time or for irregular earnings. 30% of people live in households dependent on means tested benefit which discourages work. Under 25's will be supported by a £60 a week subsidy for employers.
7 The introduction of a National Citizens service and the greater use of the voluntary sector should help tackle the problem of youth unemployment and help achieve social cohesion. The National Lottery is now being used to fund education and health projects
8 Unemployment is likely to dominate the European agenda and Europeans are not prepared to accept cutbacks in government spending and recession as the price to pay for European Monetary Union.
Europe has reached a turning point. The political map has changed completely with new left-wing governments in the UK and France. The UK government will seek new ways of combining economic progress and social justice for the mass of the people and is unlikely to follow slavishly, models created in the US or in Europe but will learn from them. The British people rejected the harsh, uncaring policies of the Conservative government which brought benefits to the richest and most powerful but neglected the poor, and there is hope that a new direction, a British way can be found which will help restore the damage done to the social fabric, build a fairer society and improve the living conditions of all.
EUROSTAT : Europe in figures, fourth edition
DfEE : Labour Market & skill trends 1997/98
DfEE : Labour Market Trends May 1997
DfEE: Research Series No 52
DfEE : Research Series No 48
DfEE : New Earnings Survey 1996
YORKSHIRE & HUMBERSIDE DEVELOPMENT AGENCY: Various Documents
New Labour Election Manifesto: Because Britain deserves better
Labour Party Consultation Paper: Millenium Volunteers
Speech by the Prime Minister the RT Hon Tony Blair MP at the Aylesbury Estate, Southwark, on Monday 2 June 1997
The Conservative Manifesto 1997 : You can only be sure with the Conservatives
Barclays Bank Economic Review Second Quarter 1997