Levelling up? How working people in the UK have become poorer - despite a growing economy

This is the second of a three-part series on how the Johnson government is different from and more dangerous than any previous government in the UK by Mark E Thomas, founder of The 99% Organisation

In this series of articles for NationalWorld I will look at the actions and rhetoric of the Johnson government to show how it is different from any previous government we have seen in the UK.

Last time I looked at how the Johnson government is neither ‘big state’ nor ‘small state’ – it is plunder state.

In this article I will argue that, despite the rhetoric, it has no policies for levelling up.

Malice in Plunderland, part 2: Levelling Up? Not really

The government constantly talks about “levelling up”. To most people, it sounds as though they intend to close the gap between the rich and poor, particularly in some of the most deprived regions of the country.

But when you look at the policies, and in particular, when you follow the money, you get a very different impression.

Spending money – but not in the right places

The government has created a significant ‘levelling up’ fund of £4.8 billion, but the money has not been directed into areas of greatest deprivation.

As the Financial Times commented:

“Further FT research has found that 11 areas in England represented solely by MPs from the Conservative party that are in the lower half of national deprivation rankings have been put in the fund’s highest category. The areas, including some of chancellor Rishi Sunak’s Richmond constituency in rural North Yorkshire, have been classified as ‘priority one’ regions while some of the most deprived places in the country have been classed as ‘priority two.’ … Diane Coyle, Bennett Professor of Public Policy at Cambridge university, said the bias ‘is pretty blatant really.’”

Other commentators have talked about ‘pork-barrel politics’ – an expression more often used in American politics, not British – to describe the blatant funnelling of money to benefit Tory seats, at the expense of the areas that most need levelling up.

Perhaps at this point it is helpful to look at some economic history to understand how the UK has become the seventh most unequal country in the OECD – and why we need to level up.

At 99% we have charted the rise of ‘mass impoverishment’ in the UK over the last ten years. This is where most working people have become poorer, despite a growing economy. You can see the stagnation in earnings in the chart below, which shows real (adjusted for inflation) earnings for a typical adult in full-time employment. Up until the Global Financial Crisis struck, earnings had been rising slowly but steadily. Since 2010, they have fallen and not yet recovered to the level they attained in 2007. This is the longest period of wage stagnation for well over a century.

By contrast, the wealth of the richest has seen continued growth (see next chart) fuelling the wealth inequality we see in the UK today. It leads me to conclude that if you depend on working for your money, your income has been falling; whereas if you depend on returns from your capital, you have been getting richer. Work has become the route into poverty, not out of it.

And if we look at how wealth has been shared over the last century in the UK, we can see that while the reforms of the early 20th century – and in particular the Golden Age of Capitalism (1945-1980) – were very good for most people in the country, for the very wealthy they were bad news. At the dawn of the 20th century, the richest 1% had over 70% of the country’s wealth. By 1980, this had fallen to under 20% (of course, this is still almost 20 times what an equal distribution would give them). While they have clawed back a fair amount during the age of Market Capitalism (1980-2015), to some of the extremely wealthy, this is unfinished business. And they are extremely influential on government policy.

So economic history helps explain why we have rising inequality and why we need to level up. We’ve looked at where some of this money is going. If we look at how the government targets tax rises, their real intent becomes clearer.

Who is paying?

When the government wanted to raise taxes – notionally to solve the crisis in Social Care – it did not invest to collect unpaid tax from the very wealthy; it did not raise the top rates of income tax; it did not equalise income tax and capital gains tax.

Instead, it increased National Insurance rates. While middle and lower earners would see an increased burden, the wealthiest would bear little or none of the cost. If we ask why they chose to raise tax from those least able to afford it at the same time as talking about ‘levelling up’, it begs the question: who is influencing government?

Following the money leads to the conclusion that the Johnson government intends to spend lavishly into favoured parts of the corporate sector (as with Test and Trace) and in areas which vote Conservative, and to make sure that the wealthy do not bear the cost of this spending.

It would take a miracle for this to lead to levelling up.

In part 3 of Malice in Plunderland, Mark E Thomas will look at how the Johnson government is attempting to dismantle democracy and the checks and balances that hold its activities to account.

Mark E Thomas is the founder of 99% and author of 99%: Mass Impoverishment and How We Can End It. He has spent most of his career in business; for many years he ran the Strategy practice at PA Consulting Group. He is a Visiting Professor at IE Business School and has a degree in Mathematics from Cambridge University.

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