My Panorama on the economic crisis and where it might lead us.
Broadcast 9th July 2012 on BBC1
Official inflation does not reflect the experiences of the poor. Panorama reveals findings of a new poll suggesting we believe politicians are unable to get us out of the mess and we talk to one of the richest men in Britain about the possibility of inequality leading to social unrest.
Britain today is suffering the longest peacetime slump in decades. Almost a quarter of young people are out of work. One of the City’s leading fund managers claims divisions in society could lead to further social unrest and a survey conducted for Monday’s Panorama programme, suggests the nation has little or no confidence in our leaders’ ability to get us out of trouble.
We’ve been here before. The last double dip recession was in the mid 70’s. That led to social unrest and political upheaval. In Monday’s Panorama I ask whether all the ingredients here for a similar reaction.
On the surface we’ve come a long way from the dark days of the 70s. But could today’s crisis destabilize the country in a similar way? Well it’s already having a severe impact on the lives of many ordinary people.
Hayley Gay is a single working mum living in South London. Things are so bad, she told me that “we either buy food or the school shoes and sometimes the shoes have to be bought.”
For many it has becomes a decision as bleak and as obvious as that. But Hayley’s circumstances are not exceptional. One in five UK families admit they are now financially living on the edge.
One of the big financial strains for ordinary working people is the cost of housing. In the 70’s average house prices were 3 times earnings. Now it is over 5 times. In London it’s a lot worse than that.
Poorer people spend a higher proportion of their income on basic products like food and fuel – exactly the things which have gone up most. Although average inflation has been relatively modest over the last few years the cost of things we buy every single day has gone up dramatically. My daily cup of coffee for instance is around 30% more expensive than it was just four years ago. And that is around two and a half times the rate of inflation.
It’s not just coffee. Over the past year or so fuel and utility bills have rocketed. Gas is up 16%. The costs of childcare is up nearly 6%. This while we are told that official inflation is just 2.8%.
While prices are rising, earning are falling. Average real earnings fell by over 3% in 2011. And that’s the largest one year fall for 30 years. While so many are struggling, there’s a growing feeling that the rich, by contrast, have never had it so good.
In fact the share of income of the top 1 per cent doubled in the years between 1970 and 2005.
The highest earners often justify that kind of pay by claiming they’re creating wealth for everyone – producing jobs, businesses and money that would otherwise not be there.
Fund manager Crispin Odey is one of the new class of Britain’s Super Rich. According to the Sunday Times Rich List in 2010 he took home over 36 million pounds. He argues that “We will only basically save ourselves if we start forgiving the bankers because we’ve got to allow banking to be profitable. If banking is profitable people will lend money. If people will lend money, the economy will grow.” He argues that divisions is society can be beneficial because an elite group of wealth creators drags the whole of the nation up.
The wider question is whether the rewards at the top do indeed trickle down to the rest of the working population?
Economist Stewart Lansley, believes they don’t. He says: “If we have an economic model, which increasingly concentrates the fruits of that economy at the summit, at the very top, then what happens is you strip demand, out of the economy. You effectively create consumer societies without the capacity to consume. And that is because you’re cutting purchasing power.”
It’s a straighh forward clash of opinion. While Lansley claims the rich are feathering only their own nests, Odey says you have a choice between “A vibrant economy in which there is …improvement and there is a general sort of entrepreneurism, in which case you’re going to get these inequalities. Or do you want a much more stable society that doesn’t, might not move at all?.
Whatever the truth of the debate is, it is clear that the gap between rich and poor has grown faster in Britain than in any other developed country in recent decades.
The gap’s even more obvious when times are tough, as in this recession. I went to Stainforth near Doncaster which is now among the worst unemployment black spots in the country. I met Teresa and her friend Amy who both left school last year and still have failed to get work. Because they can’t afford the bus fair, they regularly walk 12 miles a day to and from the Job Centre in search of work
Hayley Taylor, a local jobs consultant tells me the younger generation believe “There’s no hope. There is no hope of opportunities there are no hope of employment, there’s no new business being created. You know this is just an existence and not a life. And to hear that is so upsetting.”
Though the latest figures show a slight drop in overall unemployment, more than a million under 24-old year olds are still out of work. That’s one in five – just down from its record high early this year. The consequences of cutting off a generation from work and opportunity could be severe. Though the causes were complex and hotly debated, we caught a glimpse of what that kind of social unrest might look like, last summer when many city centres descended into riot.
At times of crisis, we’ve traditionally turned to our political leaders, trusting they’ll have the answers to pull us through. But in a survey conducted for Panorama, we found that over two thirds, 67%, of respondents had little or no confidence in politicians’ ability to get us out of this economic crisis. The findings suggest that most of the country believes our political class, are simply not up to the job.
The visibly growingly gap in inequality in society is adding to a sense of tension and anger. The disadvantaged feel increasingly lost and isolated. In the 1970s Britain found an answer to the economic chaos by identifying the unions as a common enemy and embracing the free market as the answer. This time it seems we have a new common enemy – City bankers. But unlike the 70s there’s no obvious radical alternative. Even though the sense of frustration and anger which lead to such huge change back then, is once again knocking on our door.
Panorama’s ‘Britain on the Brink: Back to the 70s?’ Broadcast on BBC 1