By Dr George Venturini

It appeared that Britons were being caught in a ‘perfect storm’ of rising living costs and falling incomes at a time of cuts to public services which threatened to return the country to levels of inequality not seen since Victorian times, would say a paper by Oxfam GB, the leading British charity fighting global poverty.

The charity organisation, best known for its campaigning on development issues abroad, would say that Britain’s 13.5 million poor people were being hit hardest by the government’s deficit reduction strategy because of the “wrong balance” between tax rises of 29 billion pounds (AU$40 billion – in 2012) and public sector cuts of 99 billion pounds (AU$146 billion – in 2012).

Oxfam warned that rising unemployment, involuntary part-time working, pay freezes and cuts in benefit levels were leading to the “biggest real-terms fall in incomes since the mid 1970s.” It said that the median income would drop by 7 per cent between 2009-2010 and 2012-2013.

On 14 June 2012 Oxfam released the briefing paper: The Perfect Storm: Economic stagnation, the rising cost of living, public spending cuts, and the impact on UK poverty. (The Perfect Storm: Economic stagnation, the rising cost of …, policy-practice.oxfam.org.uk).

It was no accident that Oxfam chose The Perfect Storm as the title of its paper. The title is both evocative and suggestive.

It is evocative in that it repeats the title of a creative non-fiction book written by Sebastian Junger and published in 1997. The story in the book is about the 1991 ‘perfect storm’ which hit North America between the end of October and beginning of November 1991, and features the crew of the fishing boat Andrea Gail, from Gloucester, Massachusetts, who were lost at sea during severe conditions while long-line fishing for swordfish 575 miles out. Also, in the book is the story about the rescue of the three-person crew of the sailboat Satori in the Atlantic Ocean during the storm by the U.S. Coast Guard Cutter Tamaroa. All six crew members of the Andrea Gail went missing, presumed dead. The ship was never found, only a few fuel drums, a fuel tank, an empty life raft, and some other flotsam. The book was adapted for the dramatic disaster film of the same title, directed by Wolfgang Petersen and released in 2000.

The words ‘perfect storm’ are also suggestive. They could be used to describe an event which is the result of a rare combination of elements and circumstances which lead to an aggravation of ordinary risks and a catastrophic situation.

Out of metaphor, Oxfam applied the words to the clear and present danger in which Britain was finding itself.

The paper was timed to coincide with the release of the latest unemployment data, which was expected to reveal an increase in the number of working people living in poverty. Six in every 10 of the 7.9 million working-age adults in poverty were from working households. The result was that many poor people in work needed state subsidies to get by. This was starkly demonstrated by number of housing benefit claimants in work, which more than doubled between November 2008 and February 2012 to 878,000.

The paper warned of an assault from all sides on Britain’s poor, caused by a toxic combination of rising unemployment, declining incomes, increased cost of living, public service cuts, benefit cuts, housing shortages and weak labour rights.

The government’s rapid deficit reduction measures were hitting the livelihoods of almost everyone in the United Kingdom – the paper said – but the particular approach taken was hurting people living in poverty the most. The focus on cutting public spending rather than raising taxes was deeply regressive, and the blend of tax increases chosen was itself regressive. In addition, both public spending cuts and the tax and benefit changes introduced by the government would have had a significantly more negative impact on women than on men. At the same time, one was seeing a synergy of economic and social needs. Protecting the incomes of the poorest people was crucial for both social and economic reasons. It was people on low incomes who were being hurt the most by the ‘perfect storm’ and increasing the incomes of the poorest would have had the strongest multiplier effect on aggregate demand in the economy. By prioritising and targeting social and economic investment, the government could have ensured that it protected the services upon which those in poverty most rely, while helping to boost demand and provide investment in the long-term productive capacity of the economy.

Oxfam was calling for decisive action to safeguard the increasing number of people living in poverty, which shamed the United Kingdom as one of the richest countries in the world.

While such a paper would not have been so surprising if it had come from the likes of, say, UKUncut, this was from a major charity organisation more usually associated with providing aid to the developing world. That Oxfam should feel it necessary to speak out about the way government treated its own poor may speak volumes about the increasing levels of inequality and hardship on Britain’s doorsteps.

The number of homeless families, in England in particular, had risen sharply in the previous year. In total, 50,290 households were given accommodation by local councils – a rise of 14 per cent since 2010-2011. The number forced to live in bed-and-breakfast accommodation had risen by 44 per cent to 3,960.

The Oxfam paper said that the number of people in temporary work because they could not find a permanent job had risen by 73 per cent, meaning there were 1.4 million “frustrated part-timers” in the United Kingdom.

Since the beginning of the recession in 2008, 830,000 permanent full-time jobs had been lost while half a million part-time jobs had been provided.

The paper also said that average earnings had fallen fell by 4.4 per cent in 2011 while the cost of food has risen by 30.5 per cent in five years.

In a statement, the Cameron government said that it “believes that the focus on income over the last decades has ignored the root causes of poverty and in doing so has allowed social problems to deepen.” … “Our social justice strategy is about providing support to transform lives and tackle the multiple and interlinking disadvantages of poverty, including early intervention, better educational outcomes and worklessness.” Is that Orwellian for ‘unemployment’?

Reacting to the paper, a spokesperson for the Department for Work and Pensions said: “Over the last decade vast sums of money have been poured into the benefits system in an attempt to address poverty – 150 billion pounds (AU$221.5 billion – in 2012) were spent on tax credits alone between 2004 and 2010. This approach has failed, with the United Kingdom likely to miss its own 2010 child poverty targets. We need to address the root causes of poverty including worklessness.” … “The Universal Credit will replace a complex mess of benefits and tax credits and make work pay.” … “It is estimated that Universal Credit could lift 350,000 children and 550,000 adults out of poverty.”

Labour’s welfare spokesperson, Liam Byrne, said that “work no longer pays for thousands of British families because of this government’s botched reforms.” … “Whether it’s changes to tax credits making families better off out of work, or failed economic policies holding back jobs and growth, ministers are getting things badly wrong and hard-working families up and down the country are paying the price.” he said.

The Methodist Church, the Baptist Union of Great Britain and the United Reformed Church were accusing the government of continuing a trend of blaming the poor as new proposals to redefine poverty were announced. In 2006 Prime Minister David Cameron had promised to measure poverty in relative terms, which take account of what people need to live on. But announcements made on 14 June signalled a definitive shift away from this focus, with plans to measure poverty in terms of drug addiction, homelessness and unemployment, rather than income levels. The churches said: “These proposals risk further stigmatising the poor in the eyes of voters and the media.” … “It is universally acknowledged that poverty is a relative concept. These proposals seek to undermine the idea that relative poverty matters, by focusing on other issues. At its worst it will seek to measure the ‘faults’ of the poor, further blaming them for poverty.” … “We are called to stand alongside the poorest and most vulnerable in society. By focusing on issues like addiction, which only affects a tiny minority of people who are poor, the Government is blaming the poor for poverty and detracting from the real issues. Recession, low pay and decreasing benefits are driving poverty and none of these are the fault of the poor.” … “These new measures relate more to the Government’s perception of poor people than to the real scale of poverty.” … “Factors like addiction are important, but they are not a measure of poverty.” The churches supported the Living Wage Campaign, which called for every worker in the country to be able to earn enough to provide the family with the essentials of life.

And yet, even obtaining an employment was no guarantee of escaping poverty in modern Britain, according to Oxfam, as new government figures, issued on the same day as the report’s, were expected to show a rise in the “working poor.”

The Perfect Storm argued that the government’s deficit reduction strategy, is disproportionately hitting those on the lowest incomes. It argued that a ‘perfect storm’ of factors including rising increasing unemployment, lack of reasonably paid jobs, rising living costs, falling incomes and the proposed deep cuts to welfare and public services were buffeting the United Kingdom’s most vulnerable citizens.

The paper’s publication was timed to coincide with release of the government’s latest data on Households Below Average income later in the same day of publication of the report. Such data were expected to reveal an increase in the number of working people in the United Kingdom living in poverty. At the time six in every 10 of the 7.9 million working-age adults in poverty were from working households.

Oxfam’s Director of U.K. Poverty said: “Despite the Government’s rhetoric about making work pay, having a job is no longer necessarily enough to lift someone out of poverty; more working age adults in poverty now live in working households than in work-less ones. The Government is justifying huge cuts to welfare support for people on low incomes by saying this will incentivise work, but there simply aren’t enough decent jobs available.”

Oxfam called on the government to reverse its cuts to working tax credits and to increase the minimum wage, which had fallen or been frozen in real terms in each of the previous four years.

The charity warned that inequality was growing in the United Kingdom, as the gap between the earnings of rich and poor widened. United Kingdom average earnings had shrunk 4.4 per cent in 2011, while the incomes of The Financial Times Stock Exchange 100 company directors had risen by 49 per cent.

Commenting on the paper, Oxfam’s director of U.K. poverty would say: “Despite the Government’s rhetoric about making work pay, having a job is no longer necessarily enough to lift someone out of poverty.” … “More working-age adults in poverty now live in working households than in workless ones.” … “The Government is justifying huge cuts to welfare support for people on low incomes by saying this will incentivise work, but there simply aren’t enough decent jobs available.”

The director added: “We need to see income being distributed more fairly if we are to make any impact on reducing levels of poverty; if we carry on down this path the UK will return to levels of inequality not seen since Victorian times.” [Emphasis added]

The situation was, briefly, this: Britain had become an increasingly unequal society since 1979, but the recession did briefly flatten gains for the richest. Oxfam said that the initial “progressive” response to the downturn saw incomes growing fastest for the poorest fifth: 3.4 per cent, and slowest for the richest two-fifths: 0.3 per cent, between 2008-2009 and 2009-2010. But there had been a short, sharp entrenchment of inequality in the previous two years. As already seen, in 2011 the earnings of The Financial Times Stock Exchange 100 executives went up by 49 per cent, while the annual pay of ordinary workers fell by between 3.4 and 11 per cent. The average director at Britain’s top 100 companies were earning 145 times more than their average worker.

“On current trends, by 2035 this inequality will reach levels last seen in the Victorian era,” said the Report, at a time when the authors said the United Kingdom had “weaker protection for those in work than Mexico.”

Oxfam Briefing Paper said in particular:

“The combination in the UK of economic stagnation and public spending cuts is causing substantial hardship to people living in poverty. This amounts to a ‘Perfect Storm’ of falling incomes, rising prices, public service cuts, benefit cuts, a housing crisis, and weak labour rights. By making different political choices, the government can both protect people in poverty and help to stimulate economic recovery in the short term, and set the UK on the way towards economic, social and environmental sustainability in the long term.”

And the paper went on:

“The UK is facing a set of serious, interlocking challenges. The economy is stagnating, unemployment is increasing, prices are rising, incomes are falling, and spending on public services is being cut back rapidly. In this paper, Oxfam has taken its experience of working with partner organisations across the UK and the stories of individuals with whom those partners work, together with a wider analysis, to outline the reality of these challenges for people living in poverty. For the 13.5 million people who currently live in poverty – a fifth of the population – the combined impact of all these challenges is creating a ‘Perfect Storm’ that is pushing already fragile livelihoods to breaking point.”

Continued Saturday – A cast of characters: The Monarchy (part 10)

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