Neoliberalism: 1960s compared to today’s dependency ruined households
By TruePublica: Neoliberal capitalism may have seemed like a good idea when the unions had a stranglehold on the workforce and held an iron fist up against industry and business back in the 1970s and early 80s but the pendulum has since swung way too far. Almost everything in Britain has become financialised – everything has a price with interest to pay and irrespective of the things that are better or worse when compared to the 1960s, one thing is very different – the cost of living today is out of control.
In the mid-1960s, an annual salary of £1,357, the equivalent of a £25,000 salary today, bought a new build three-bedroom semi in London (with a standard mortgage). This family could afford a car and a TV. This income category had a husband who was generally the sole income earner, and a wife at home looking after two or three children. This household was not dependent on the state for anything. Child benefit was not invented until 1977 but there were child tax/family allowances against income tax. A deposit for that same three bed-semi in London in 1965 was £240 – today it is closer to £50,000. The average house in London is now over 200 times that of the average it was in the 60s and a young Londoner today would have to increase their pay by 300 per cent to enjoy the same lifestyle as someone 53 years ago.
In 1960, almost no-one had a credit card or credit account other than a mortgage and maybe renting the TV or sofa. By January 2019, there were 60.1 million credit cards issued to UK residents. The average household today owes £15,385 (without mortgage debt) to credit card firms, banks and other lenders.
We now live in a world immersed in credit which again was not available to the public at large back in the 1960s. An eye-watering £139m a day is paid in interest by ordinary people to pay for debt – where pay growth has severely lagged that of corporate wealth. Britain, which took America’s lead in the 1970s and 80s with Margaret Thatcher’s ties to Ronald Reagan, ended up screwing a largely self-sufficient nation of people who were not dependant on much more than hard work.
Half need help
Today, about half of all working-age households (source) currently receive some state benefits to get by. Even excluding child benefit – which all but the highest-income families are eligible for – the figure is about one in three.
Worse, there are about 1.8 million households (2.4 average household size) of working age who get at least 80% of their income from benefits.
About three-quarters of working-age benefits are spent in one of three ways:
- Tax credits, mostly topping up the incomes of families with someone in paid work, but on modest earnings
- Housing benefit, helping low-income people meet the cost of rent
- Disability, incapacity and sickness benefits, for those whose health limits their ability to work or adds to the cost of living
Housing benefit exists to help low-income renters pay for a home. It costs the government more than policing, overseas aid and various other government departments. This is because the proportion of people living in council housing has fallen from about one-third of the population in the 1970s to about 9 per cent today leaving almost everyone to pay ‘market rent.’
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Three million working-age households receive £17bn per year in housing benefit. In 1990 that figure, fully adjusted for inflation was £5billion. A further £6bn goes to pensioner households.
Spending in this area has risen almost 400 per cent since the early 1990s alone, after adjusting for inflation. About 40 per cent of council property sold in the right-to-buy spree ended up in the hands of private landlords.
Universal Credit is a social policy that has failed to such an extent that schools have been opening food banks – some commit crimes to get to the relative safety of prison, one in five now live in poverty and child protection orders due to extreme poverty have increased 400 per cent in the space of just a few years.
Half need discounts to pay bills
If it’s bad that about half need state support to keep a roof over their heads and live somewhere – it gets worse still.
Things have now got so bad for the average household in Britain that nearly half (47 per cent) of households in the UK rely on discounts to afford their weekly necessities. (source)
Millions of households across the country are relying on discounts and cashback to survive, according to a report by the Centre for Economics and Business Research (CEBR).
The study found that a quarter (23 per cent) of consumers said they would not be able to afford most or all of their necessities each week without the help of discounts.
The Discount Dependency Report determined consumers’ level of discount dependency by the percentage they save on necessities each week with the help of discounts and splits consumers into three cohorts; discount dependent, discount supported and discount independent.
This number of households is equivalent to 13 million households across the UK and nearly 30 million people.
However, a further 6.8 million households (24 per cent) are discount supported and still rely on the savings they make from discounts to support them in other ways, such as with paying household bills.
Most consumers who fall into the discount dependent cohort also fall into the squeezed middle or “just about managing” group. These consumers are likely to be in skilled manual jobs, earning between £20,000 and £30,000, yet find their outgoings regularly outweigh their income. As a result, they look to discounts to cover the shortfall between income and benefits.
Highlighting the difference discounts can make, the report said consumers spend an average £67 a week on groceries but save roughly £52 by using discounts, meaning without them consumers would be spending as much as £119 on their weekly shop.
The report found there is a significant disparity in the reliance on discounts across the UK with London households being substantially more discount dependent.
More than a third (36 per cent) of Londoners have been unable to buy necessities at least once in the last year because they did not have access to discounts. The next highest score was 26 per cent in the south-east and north-west.
Just three in 10 (29 per cent) consumers are discount independent. However, although they are not reliant on discounts to afford essentials, it does not mean they do not use discounts at all. A third (32 per cent) of consumers put the money they save by using discounts towards other household essentials such as food and utility bills.
In Summary – the buying power of the average household in Britain has collapsed over the last four decades in particular. About half of all households are now in receipt of some form of state allowance to survive outside of what would end up being homelessness and the same amount still depends heavily on discounts to pay for food or make savings to pay utility bills.