The sharp fall in disposable income among UK households has been blamed on the war in Ukraine, supply chain problems and Conservative policies. It is a product of all these things. But it is also a symptom of a longer decline in living standards that predates them. In response, both the Conservatives and Labour have proposed variations on the same programme of growth and jobs. Yet what if this emphasis is neglecting another essential area: the everyday goods and services that we all depend upon?
This is the argument advanced by academics in a new book, When Nothing Works. Living standards aren’t just determined by income or wage growth – they also depend upon people’s access to essential infrastructure and services, such as housing, transport and energy. Rather than ensuring that these goods are available and affordable to everyone, the government has instead fixated on work as the main route for lifting people out of poverty. Its punitive benefits system has pushed more people into low-paid work but has not protected them from falling below the minimum needed to survive. Meanwhile, because many essential services have been outsourced to the market, their costs have escalated – and households are struggling.
Nowhere is this clearer than in the dysfunctional rental market. Government spending on housing benefit has risen by around 40% since the mid-1990s, yet this has not prevented people from falling into poverty. So long as landlords continue to drive up rents and social housing remains scarce, private renters will be playing catch-up, and the government will either have to accept an ever-increasing housing benefit bill or leave people exposed to high housing costs. It has opted for the latter, freezing local housing allowance in England. In the UK, the housing overburden rate for low-income private tenants – the percentage of them who spend more than 40% of their income on rent – is 53%, more than three times the rate in Germany. High housing costs deepen poverty. In Scotland, for example, where housing is relatively affordable, rates of child poverty are lower.
An easy way to protect people from these costs would be unfreezing local housing allowance. But a future Labour government should go further. A better solution to the cost of living crisis would be providing universal access to the services and goods that form the bedrock of prosperity. This would mean building more social housing and curbing soaring rents with reforms such as rent controls. In other areas of life, it could mean making nutritious food cheaper by subsidising it, giving children free school meals, or providing free internet access.
In 2018, Rachel Reeves wrote a pamphlet calling for a focus on the “everyday economy” – the services and social goods that sustain our daily lives. Five years is a long time in politics. Although Labour has made gestures towards transformative reforms, such as its pledges to create a national energy company and support a community right to buy, its economic agenda is framed overwhelmingly in the conventional language of growth. The shadow cabinet seems reluctant to focus on questions of economic power, lest these be interpreted as a Corbyn-era hangover. But there are many examples of progressive experiments that it could learn from within its own party, such as Sadiq Khan’s free school meals policy in London or Paul Dennett’s municipal housing company supplying affordable homes for rent in Salford. The challenge for Labour should lie in scaling these up.