The middle class is shrinking. Could Labour’s ‘extreme’ economic ideas be the key to saving them?

A careful reading of Labour’s manifesto reveals the ideas to be far less radical than critics have suggested. In fact, they are in alignment with the OECD’s recommendations to solve this problem

James Moore
Thursday 11 April 2019 08:18 EDT
Comments
Old empty wallet in the hands
Old empty wallet in the hands (Getty)

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

There are some who will react to an OECD report bemoaning the plight of the middle class by pointing out that there are an awful lot of people who would love to have the problems they’re experiencing.

I’m thinking here of those reliant on the UK’s growing network of food banks, a rare growth industry in this country.

But that misses the point the organisation – a rich country club – is trying to make and its motivations for making it.

The problem with the “squeezed middle” it identifies, is the danger of pushing ever more people into the arms of extremists who offer simple, and bad, solutions to complex problems.

It describes the middle class as the “bedrock of democracy”, which it fears could be undermined if they aren’t addressed.

In this country, and in many others, it’s already happening. Take a look outside the window.

The squeeze is at its most potent when it comes to those at the lower end of the middle income bracket, defined by the OECD as those earning between 75 and 200 per cent of national median average income.

A lot of the people in it are genuinely struggling, with high housing costs and debt levels combined with insecure work. They’re JAMS. People who are “just about managing” and aren’t too far away from relying on food banks to serve up dinner. An economic downturn (hello Brexit) could easily find them in that unhappy position.

So far, so familiar. It’s not as if we haven’t heard this before.

It’s regularly on the menu alongside the fancy food enjoyed by the rich and powerful at places like Davos, where they gather once a year to wring their hands about the declining economic clout of those in the middle, the suffering of the poor, and the ever expanding wealth of the 1 per cent of which they are members.

They rarely address the elephant in the room, namely their contribution to the problem through the avoidance of tax, a point loudly made by historian Rutger Bregman during a panel at the last shindig.

To its credit, the OECD doesn't fight shy of offering up solutions the Davos glitterati might find uncomfortable.

It says governments need to address the problem with a “comprehensive action plan” aimed at improving access to high-quality public services and ensuring better social protection. It also urges an increase in the supply of affordable housing and mortgage relief to help overburdened households get back on track.

But how to pay for these things? It would be frankly grotesque were lower income groups to have to bear the burden, especially in a country like Britain where they have already been disproportionately squeezed themselves through austerity.

Mercifully, the report doesn’t suggest that.

For a start, it doesn’t shy away from recommending higher rates of tax for higher earners. But it recognises that they don’t represent a panacea (and will only work if accompanied by further measures to reduce international tax loopholes that facilitate the avoidance of outright fraud).

So it also calls for a shift in the way we are taxed, away from income and towards capital gains, property and inheritance. In other words, it wants to see more taxes on wealth.

This would help to address a perversity infamously highlighted by billionaire Warren Buffett when he compared his marginal rate of taxation with that of his cleaner, who paid proportionately more.

Similar ideas are in Labour’s play book, or being kicked around.

There were undoubtedly flaws in the party’s last manifesto, and there are some very big flaws with the Corbyn project more generally. You can start with the antisemitism which has been allowed to flourish and move on to the bullying meted out to his opponents, in which there has been a nasty streak of misogyny.

Support free-thinking journalism and attend Independent events

Then there is the way party members’ views on Europe are being ignored – Brexit is a Tory project that will hit the people Labour wants to help hardest.

But some of the harshest attacks on the party have been reserved for its economic ideas, which have frequently been characterised as extreme.

A careful reading of them reveals them to be far less radical than critics have suggested. They are in alignment with the report’s recommendations in many areas.

There has been a move towards the extreme that the report fears in this country, as the recent depressing events in politics reflect. But it is towards the extreme on the right. And it has been made largely by baby boomers.

Their offspring, and especially their grandchildren among the “squeezed middle” that is losing much of the what the boomers had, are much more inclined towards the Labour Party. If only it could get its head around not betraying them over Brexit, it would be shooting at an open goal, because the economic folly of leaving the EU will exacerbate the squeeze on the middle and kick the poor in the teeth. Again.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in