which had enriched the owners of capital, had done nothing for the people who lived and worked in the industrial cities. In Sybil, the novel he wrote in response to Engels, Disraeli coined the phrase ‘two nations’ to describe the division between the rich and the poor. The very message that Engels telegraphed first time around is now coming back again from the post-industrial revolution. It is a big question: the condition of England question or, rather, the condition of Britain question, and today there is not just one of them but ten.
We will come, in the chapters that follow, to the principles, methods and policies that could start to furnish answers but we need, before that, to state the problems baldly. These are the problems that every political party will face whether it has answers or not. The price of having nothing to say is that the country carries on drifting, with no direction, endlessly, to nowhere in particular.
Ten Condition of Britain Questions
The ten condition of Britain questions fall into three categories, the first of which is the income and wealth of the nation. The distribution of wealth becomes less fair with every passing year and earnings growth has disappeared. This has broken the covenant of British housing and shut out a generation of prospective buyers. Then there is the chronic threat that automation is said to pose to the structure of developed economies. All these anxieties together conjure a fear about how Britain will earn its living. The second set of questions are political. British institutions are not working well. They do not grant the citizens a sense of agency and they are not providing services either fairly or of adequate quality. The third and final body of questions are cultural. With Britain on the cusp of breaking its relationship with the EU it will need to find a new sense of ease and a new place in the world.
Taken together, these are the fundamental facts of contemporary British politics. They help to explain Britain’s European decision, the strangely volatile aberration of the general election of 2017 and the appeal of the populism of Jeremy Corbyn. Leaving the EU in turn intensifies the problem. There is no assessment of the medium-term economic outlook that does not describe leaving as an economic loss. This simply redoubles the importance of the first pressing condition of Britain question, which is how Britain makes its way in the world.
1 How Does Britain Make a Living?
The first industrial nation has slowly transformed itself into a viable service economy. It does, however, lack many sectors of world-class calibre. One industry in which Britain competes at world class causes as many problems as it provides solutions. The banking crisis of 2008 showed the fragility of an economy which is too heavily reliant on financial services. A vast tranche of public money was, rightly, committed to rescuing the banking system. Had the bail-out not been forthcoming the consequences would have been even worse than they were. As it was, they were merely dreadful. The deficit in the public finances rose, at its height, to £103 billion, which is 6.9 per cent of GDP, the highest since the Second World War.
Tax revenue was revealed to be too concentrated in the City of London. Financial services accounted for 14 per cent of all tax collected in 2007 and today they still account for 11 per cent. The excessive reliance on financial services is also a way of describing an economy that is geographically unbalanced. The towns and cities of Britain outside London rose out of the ashes of manufacturing during the 1980s, but the recovery was deceptive. It was based too heavily on public spending and a reinvigorated public sector. A third of the jobs in Newcastle in 2017 were in the public sector. When the banks crashed they spread chaos into the system and the nasty medicine of austerity made the condition worse. The private sector in London and the public sector in Newcastle were shown to be umbilically linked.
Yet it would be self-harming to denigrate the financial services industry to the point that it flees. Britain is already taking that risk by leaving the EU and further hostility would be foolish. The rules of the British economy require a great deal of change, on which more anon, but the nation can only grow, can only answer all the questions that follow, if its economy is productive. To begin that process by dismantling a globally competitive industry would be an eccentric move. The tough question though remains: if Britain is not to be over-reliant on finance and if it is not going to use public spending as its method of economic recovery, where is the enterprise and what will the people of Britain do and make? Unless there is a clear route to prosperity the question of the distribution of wealth becomes redundant. But as long as there is no such route, then that is the second pressing economic question we face.
2 How Do We Reduce Inequalities of Income and Wealth?
Each generation born after 1955 has accumulated less than the one that went before. The ownership of property has also declined with every succeeding generation since the 1950s, and so has net financial wealth in the form of current and savings accounts, equities and gilts. The richest 10 per cent of people in Britain now own 66 per cent of the nation’s wealth. Glacially but surely, the pattern of reward in capitalism has shifted towards the mill-owner and away from the foreman, let alone the worker on the shop floor. Over the last four decades the share of national value which has gone into the pay packet has fallen from 59 per cent to 54 per cent. The suppliers of capital have seen their share rise from 22 per cent to 27 per cent.
This would matter less if everyone was being paid more, but alas they are not. The promissory note of British politics was that higher labour productivity would be rewarded with higher pay. All over the developed world that link has broken. It broke abruptly in the United States in 1970. Median earnings in Canada have been flat for thirty years, even though productivity has grown by 37 per cent. Real monthly income fell over the past decade in Germany. Mechanisation and the premium paid for skilled over unskilled work has now broken the link in Britain. Wage growth has been lagging productivity improvements for two decades. In the five years before the recession of 2008 the economy grew more than 2 per cent each year and productivity by 1.6 per cent each year. But the workers did not get paid for their smarter work. Median incomes were flat apart from at the top, where they kept rising. Until 2002, average wages grew in tandem with GDP. Not now: average wages stopped growing in 2003 and are not expected to pick up before 2020.
Deprived of pay progression, most people now earn what they might have expected to earn ten years ago. A decade has been spirited away. The young have had it even worse; for people in their mid-twenties, fifteen years of pay growth have disappeared. Nearly half of the people affected have no qualifications beyond GCSEs. They spend a lot of their disposable income on food and petrol and two-thirds of them are not saving a penny for their pension. It is quite possible that the fortunes of those who start work in a time of stagnant pay growth will never fully recover. These are the people for whom housing takes up too much of their income and whose hopes of ever becoming home-owners are receding. Housing is the third urgent question.
3 How Do We Provide a Home for All?
Housing has often been the point at which public policy and the political promise meet. After the Great War, David Lloyd George pledged to redeem the sacrifice of the conflict with homes fit for the returning heroes. Neville Chamberlain summarised the Conservative promise to the nation as the creation of a ‘property-owning democracy’. After the Second World War, Aneurin Bevan’s reputation came at least as much from the housing stock that was built as it did from the formation of the NHS. Margaret Thatcher’s popularity with the urban working class came in large part because she adopted a policy that Frank Field had proposed but the Labour party had rejected – the sale of council houses to their tenants.
Housing is once again a pivotal question in British politics because a generation is being locked out. At the start of the last century only 10 per cent of the nation owned their own home. By the end of the century home ownership had risen to 70 per cent. George Orwell was one of the first writers to comment on the way the Englishman made a castle of his home. The British
