The Current Conservative Party’s Assault on the Poor

 

 

As is well know the period since the election of the coalition/ conservative government in 2010 has seen no rise in average real wages measured either on a weekly or hourly basis as I show in Figure 1. In 2019 real hourly earnings were 6 per cent below their level in 2010, while real weekly earnings were 3 per cent lower. The difference is due to people working more even though their hourly earnings were not rising.

Figure 1 Hourly and Weekly Earnings 1979-2019

Sources: ONS Data. Employee earnings in the UK and LFS: Total actual weekly hours worked.

So, on average over the period from 2010 to 2019 real wages were not rising but what of the poorest, what was happening to their incomes? Neither wages nor average incomes tell us about the incomes of the poorest. The best measure is their disposable income, that is their market income, what they earn from wages, self-employment or non-labour sources, plus the befits they receive less their taxes. In the Figure below I show a measure of disposable income that makes an allowance for household size -, incomes from a two-person household cannot be directly compared with a one-person household or ones with children. This is termed equivalised disposable incomes. For the bottom decile (that is the poorest 10 per cent of the population) equivalised disposable incomes declined by 48 per cent between 2015, the election of the conservative government, and the last full year before the pandemic. Figure 2 below shows that this unprecedented fall took this measure of income back to below the level of 1991 and only marginally above that of 1979. 

Figure 2 Equivalised disposable incomes for the bottom 10%

Source: ONS data: Average household incomes, taxes and benefits of ALL households by decile group

What explains this dramatic fall? First, it is not due to falls in market incomes. As is shown in the Figure below it increased by 17 per cent from 2015 to 2019, helped in particular by the real rise in the minimum wage.

Figure 3 Market Incomes

Source: As for Figure 2.

The answer is in Figure 4 below. On the left we see that the cash benefits to supplement earnings were slashed by nearly 25 per cent, while of the right taxes and national insurance contributions increased more than two and a half times. 

Figure 4 Benefits and Taxes of the Bottom 10%

Source: As for Figure 2.

The poorest were the subject of an assault on their incomes without historical precedent as their cash benefits were cut and their taxes increase, both government decisions. For those inclined to believe this is what Conservative governments always do it needs to be noted that the Thatcher government did nothing similar (see figure 4 above). Why was the period after 2015 so different?

The Guardian reported in July 2015 that  ‘George Osborne has unveiled an unexpected boost for low-paid workers, introducing a compulsory national “living wage” in a budget that also contained an assault on many of the measures introduced by Labour to tackle poverty.

In a final flourish in the first Conservative-only budget in 19 years, the chancellor portrayed the Tories as the party of working people by declaring that the living wage will be introduced from next April at a rate of £7.20 an hour for people over the age of 25.’

This rhetoric continues to this day. What the data shows is that the benefits to the poorest introduced by Labour are essential to prevent falls in disposable comes for the poorest. George Osborne may well have believed his argument that wages could replace benefits, he was imply wrong.