Brexit: A Crisis Long In The Making

What is surprising about the result of the referendum is that so many of us were surprised – astonished may be closer to the truth. If we had thought a bit more deeply about the state of Britain and placed the referendum within a framework of the country’s policy history over the past 4 decades – since the 1980s- then all would have been predictable. What has happened – a narrow majority decision to leave the EU – has more or less nothing to do with the failings of the EU and everything to do with the state of the UK.

Possibly the most significant factor has been the welcome given to neo-liberal economic ideas and their embodiment in national policy. Fundamental to this ideology is the proposition that markets are self-equilibrating. That, if left to themselves with the minimum of government regulation, all would be well and everyone would be better off including both the rich and the poor. Of course the conditions required for such an outcome are in practice not present in the real world where there is risk and uncertainty and concentration of ownership and control. The generalised acceptance of ‘austerity’ was yet further evidence that nothing had changed after the 2008 crisis.

Nothing was done to effectively curb the greed of the banks and the so-called shadow financial sector while the key recommendations of the Vickers Commission were eviscerated by the Treasury under Osborne. If anything the financial system is even more unstable now and more unregulated than it was in 2008. These outcomes reflected policy choices by the Tory Government aided and abetted by the Lib Dems during the Coalition.

What have these failings of fiscal and monetary policy got to do with the referendum? It is fairly straightforward to list what was done, why and what the impact has been.

• There have been generalised cuts in welfare spending which have significantly reduced the standard of living of the poorest citizens. Most egregious has been the bedroom tax which was levied on families who in most cases had no option but to pay the additional charge since no alternative social housing was available. The cuts in welfare support have hit hard and were focused on the poorest. There has been a massive expansion of food banks and the numbers who are homeless and sleeping on the streets.
• Since Thatcher we have seen a deliberate attack on social housing with the forced sales by local authorities who were given no choice in the matter and were required to sell irrespective of the housing needs in their area. The sales were subsidised significantly at a cost to the public finances and most of the former social housing is now part of the buy-to-let market – at massively inflated prices compared with the former council rents.
• Government has shifted part of the cost of social care onto social housing through the system of local taxation with an additional levy irrespective of the ability to pay. A system of local taxation that was already highly regressive. The Government has had no social housing building programme and has failed to meet the growing housing needs of a population that has significantly increased in the past decade – and especially since 2004 with the lifting of controls on Eastern European labour migration into the UK.
• At the same time as social housing was contracting in quantity and becoming more expensive and the incomes of tenants were declining under the impact of changes in welfare and housing policies, the needs were increasing due to this population growth via. immigration of labour that was concentrated in precisely those areas where the social housing stock was contracting and not being replaced.
• At the same time, the process of quantitative easing by the Bank of England has shovelled money and credit into a private housing market where the stock has increased by only a small percentage. Various forms of subsidies, many of them favouring the better-off, have simply added to housing demand. Inevitably house prices have skyrocketed and rents gone through the roof.

Not surprisingly people have attributed their worsening standard of living and especially the deterioration in access to decent housing to Government policies. The situation has been exacerbated by welfare policies that have nothing to do with the problems of financing government but everything to do with a political dogma that wants to roll back the state.

• There is the whole question of ‘the precariat’, ie people in employment that is unstable, badly paid, increasingly low skilled and exploitative. This is what has been increasingly on offer in labour markets in the UK precisely in line with what the neo-liberal ideology has wanted. It is the Amazons of the world who have pushed for zero hours contracts. But these labour conditions wouldn’t have been available without the active compliance of Governments – both Labour and Tory.
• Immigration has undoubtedly added to pressures in the housing market and in social services such as health and schooling where there was already significant underfunding. Under Thatcher and Major the NHS was massively underfunded and this was reversed under Blair. But after years of Cameron we now have an NHS that is estimated to need a minimum of an extra £20bn between now and 2020, and with an additional £2bn needed now for social care. There are now an estimated 3.9m children living in poverty in the UK, two-thirds of these in families who are in work.

Our political class should not be let off the hook and we need a clean sweep of both leadership and their failed socio-economic policies. What we do not need to do is leave the EU although as an arrangement it surely is in need of root and branch reform.