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Lessons For ‘Building Back Better’: Inequality, Poverty & The COVID-19 Pandemic In Britain

The coronavirus (COVID-19) pandemic has posed profound challenges to the way our government, economy and society function. Offering vital lessons if we dare reflect, the crisis has re-articulated and exacerbated the existing inequalities in British society; leaving the millions of people who were living in poverty prior to the pandemic, even worse off after it. While the harsh light this shines on Britain in the twenty-first century may be uncomfortable viewing for some, the lesson this grim reality offers also opens doors; in particular, for how we should focus our efforts in Building Back Better in the years to come.

The full socio-economic effects of the pandemic are yet to unfold, but questions are already being asked about how we should repay the debts we’ve incurred in response and re-build the country in the years to come. While the UK Conservative government’s recent budget has included policy-shifts like the increase in corporation tax from 19% to 25%, such efforts only paper over the cracks. Little support is offered to the fundamentals of the economy, severely neglected in recent years, and this budget recycles many of the policies we’ve seen before, including further rounds of reductions in government spending and real-term pay cuts for front-line NHS staff. However we dress it up, what we see here is the same Conservative Party narrative, revealing that seemingly-unending hypocrisy; where in the same breath they hand out billions of pounds in COVID-19 contracts through illegal processes to their friends, while citing fears of national debt to justify further rounds of ideologically driven fiscal retrenchment and reductions in the size of the welfare state. 

It is precisely such policies that caused Britain to be so poorly prepared when the pandemic struck. The previous decade of austerity significantly reduced the capacity of local authorities, the government, and the wider health and social care system to respond effectively. Since 2010, local authorities have experienced 60% funding cuts. Even as local authorities were given responsibility for the public health for their constituencies, £850mn was cut from the government public health grant to local authorities since 2015. The Public Health England operational budget sustained a 40% real term cut between 2013 and 2019. Meanwhile, since 2012 the Lansley healthcare reforms have pushed the NHS through a disruptive top-down market-oriented restructuring of the service that has fragmented the system. This occurred as the NHS received only cash increases in funding that were less than 1% a year, failing to keep pace with the growing demands of an ageing population. And this came at the same time as some 32,000 overnight beds were cut from hospitals in England, roughly the same number the NHS had to scramble to find for COVID-19 patients. 

As we watch the announcements from the latest government budget, it is clear we risk making the same mistakes again. This threatens to not only exacerbate the issues that made the country so vulnerable to the crisis in the first place but missing those key lessons that crises such as these teach us time and again. 

First amongst these lessons is that crises, whatever their form, weigh heaviest on the already disadvantaged and deprived in a society, serving to re-articulate and exacerbate the existing inequalities in that society. 

We can see this pattern reflected across the various forms of crises we’ve experienced in recent years: in the uneven impacts of the financial crisis of 2007/8 and austerity in the years that followed; in the way racism, prejudice and violence toward marginalised communities increased after right-wing populist movements found victories in elections, such as Brexit in the UK or Trump in the US; and in the way that it is the poorest countries in the world who are already bearing the brunt of the climate crisis. In the UK with the COVID-19 pandemic, as with many countries around the world, we can already see these worsening patterns of inequality writ large. 

In January (2021), the Lancet journal wrote that the pandemic has revealed “the fragility of civilisations built on social injustices, short-term policies, and a dangerous disregard for the environment”

This has been most clearly expressed in that the people disproportionately likely to die from COVID-19 are those already at the sharp end of wealth and health inequalities. Reports from the Health Foundation reveal how people living in overcrowded conditions in the most deprived areas of the country are the most likely to die from COVID-19. Care, leisure and service sector staff have the highest death rates under the age of 64. People from black, Asian and ethnic minority communities have disproportionately high exposure to and risk of death from COVID-19 as they are more likely to live in cramped, multi-generational housing in deprived areas and hold public-facing, low paid occupations (e.g. taxi drivers, bus drivers, security guards, carers, etc.). 

In February (2021), an unpublished government report found that the poorest areas of the country had been hit by a ‘perfect storm’ of low wages, cramped housing and failures of the £22bn test-and-trace scheme that have deepened existing social inequalities and led to “stubbornly high” coronavirus rates in England’s most deprived communities. Unmet financial needs have meant that people in more deprived parts of the country have been pushed into taking unnecessary risks with the rules because they can’t afford to do otherwise. Only 17% of people with symptoms have come forward to get tests fearing that positive results would stop them from working. 

The pandemic hit in the context where communities up and down the country were still struggling to stay afloat after a decade of austerity. In 2019, the United Nations rapporteur on extreme poverty and human rights described how the UK government had inflicted “great misery” on its people with “punitive, mean-spirited, and often callous” austerity policies driven by a political desire to undertake social re-engineering rather than economic necessity. This involved a decade of cuts to the welfare state and public services that have swept away key elements of the post-war social contract. In so doing, it has weakened precisely those institutions that stop people falling into poverty and inequality widening. The result was that in 2019, one fifth of the UK population – some 14 million people – were living in poverty, 1.5 million were destitute and unable to afford basic essentials, 30% of children lived in poverty, millions of people had to use food banks and rates of homelessness were soaring, and in-work poverty stood at 56%. For the first time in more than 100 years, life expectancy had stalled and had even reversed for the most deprived people in society, as the gap in health inequalities widened and health outcomes worsened. 

What little support has been made available by the UK government to support people during this time has not been enough and has actively contributed to the worsening dynamics of inequality we see around the country.

Sir Michael Marmot, in his report on the impact of COVID-19 in the UK, describes how families at the bottom of the social and economic scale were missing out before the pandemic, and are now suffering even more – losing health, jobs, educational opportunities and lives. As recent reports from the Joseph Rowntree Foundation show, this is because the pandemic and resulting economic crisis have battered the UK labour market, significantly increasing unemployment, restricting job opportunities and reducing earnings. While there have been temporary measures from the government to support people through the labour market and benefits system, the evidence shows this has not been enough. For instance, polling in May 2020 revealed that most families with children in receipt of Universal Credit or Child Tax Credits had to go without essentials, were building up debt and falling behind with their bills or rent. The £500 discretionary grant available to those needing to self-isolate when they’re unwell is not only a derisory sum, but reports show that three quarters of applications have been rejected. Now in 2021, the government’s plans to cut the £20 per week uplift in Universal Credit – where the UK already has one of the lowest rates of unemployment support in the OECD – risks increasing the level of poverty further. Hundreds of thousands of private renters – shown to be the hardest hit by the pandemic – have fallen into rent arrears, and without financial support we risk a surge in rates of homelessness, adding to the hundreds of thousands of people who were already without a home prior to the pandemic. 

At the same time, the other primary policy response to the pandemic economic crisis – quantitative easing – has further contributed to the worsening of inequalities in Britain. Since the start of the pandemic, hundreds of billions of pounds have been pumped into the economy by the Bank of England through quantitative easing. This puts money directly into financial markets. Interest rates are kept low, bond stock and markets improve, and in principal this should boost the economy as banks increase lending and people feel wealthier, encouraging them to spend more. However, this isn’t how the process has worked in practise.

Over the last decade the money created through quantitative easing has largely gone to pension funds and insurance companies, and the extent to which this money actually filters into the real economy or boosts consumer spending is contested. This is because 40%of the stock market is owned by the wealthiest 5% of the population, so while most families have seen no benefit from quantitative easing, the richest 5% of households would have each been up to £128,000 better off. At the same time, the few improvements in consumer spending we’ve seen have been driven by debt: savers with cash assets get a raw deal from low rates on bank deposits, while families with mortgages get cheaper costs, enabling them to keep spending, often funded through cheap borrowing on credit cards and personal loans, which have soared above levels seen before 2008. The result is that since the 2007/8 financial crisis when quantitative easing started, wealth inequality in the UK has soared. As the Bank of England continues to pump billions of pounds into the economy, we can expect such trends to continue.

In the short term, there is a clear need for policies to support incomes so that people can adequately protect themselves, their families and their communities. 

The picture we’re seeing across the country provides a clear demonstration that urgent action is required. Specifically, we need to support those people whose lives are directly affected by COVID-19 to enable them to self-isolate when they’re unwell and to have enough money to pay their bills. This should have been available at the start of the pandemic and it is still not in place now. The New Economics Foundation (NEF) shows a methodology for doing this, which includes the following:

1. Increase unemployment support & create a new minimum income guarantee: 

The UK’s weak social security system has increased public health risks and offers less support than most OECD countries – prior to the pandemic, people working on the national average wage in the UK received 34% of their former wage if they lost their job. This is the third lowest rate in the OECD (as shown in the graph below). Introducing an emergency minimum income guarantee would provide the economic security that people need to self-isolate – for NEF, this would be a non-conditional payment of £227 a week for any adult who needs it.

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2. Increase sick pay: 

The UK has the lowest mandatory COVID-19 sick leave pay as a percentage of previous earnings of all OECD countries – just £96 per week, unless you earn less than £120 per week, where you get nothing. In Canada or New Zealand, you would receive the equivalent of £287 or £308 a week, respectively, while even in the US, people receive full pay to isolate when they have COVID-19. Increasing sick pay would mean people wouldn’t have to choose between staying home to protect others and being able to afford food and pay their household bills. As part of the minimum income guarantee NEF advocates raising statutory sick pay to at least £227 a week.

3. Improve support for businesses: 

Helping closed businesses survive the crisis means that employees don’t have to come into work to prevent their employer from collapsing. But much of the support available to businesses has been in the form of loans. Getting businesses further into debt jeopardises their long-term viability and many are already struggling to make repayments. An injection of public money, in exchange for a government stake in the company, could help absorb losses without damaging the long-term viability of a business, while potentially providing a future return to the government.

4. Increase support for parents: 

Many parents have to choose between working extra hours to make ends meet, or not feeding their family or paying the rent. Government funding to nurseries, meanwhile, does not cover the cost to nurseries of providing childcare, which increases fees for parents who pay for non-state-funded hours. The cost of childcare has risen four times faster than wages over the past decade, making it unaffordable for many. Increasing financial support for families, such as through increases to child benefit, properly funding childcare, and increasing the value of free school meal packages, would reduce pressure on parents to go out and work when they would otherwise be isolating.

5. Increase support for renters: 

Providing housing security would help people afford to isolate when they need to. During the pandemic, 7% of renters have fallen behind on their payments, with young people and the self-employed particularly affected. In Germany, renters don’t have to pay back rent arrears built up during the crisis until summer 2022. The UK government should write off debt that renters have accumulated during the pandemic, extend the current ban on evictions, and increase housing benefits to help people to meet housing costs. 

While such support will be invaluable for millions of people in the short-term, over the long-term we need to find lasting, sustainable and equitable ways to ensure that these problems – where crises weigh disproportionately on the most deprived in society – don’t happen again.  

The pandemic has shown us that Britain’s welfare state, in its present form, is failing; the reach of our government, the range of support available, is not enough; the current imbalance of state and market serves only to harm society. 

Contrary to the narrative of right-wing politicians and media, this is not because the burden of national debt requires fiscal ‘belt-tightening’, millions of ‘shirkers’ fraudulently claim benefits, or swarms of immigrants are overloading public services. Rather, it is because over the last four decades, under the dominance of the neoliberal economic doctrine, Britain’s public services and welfare state have progressively been dismantled. 

Over the last forty years, British governments have enabled successive rounds of fiscal retrenchment, pro-market regulatory reforms, liberalisation of labour and housing markets, and the financialisation of society and economy. Together, such reforms have weakened Britain’s social security system and welfare state and made our labour and housing markets increasingly precarious and insecure. And it is precisely such processes of pro-market reform and state retrenchment that made Britain so vulnerable when the pandemic hit. 

In this context, the key lesson the pandemic teaches us is that we must re-invigorate the meaning of the welfare state in Britain in the twenty-first century. 

In 1942, the Beveridge Report laid the foundations for the British welfare of the state. It proposed widespread reforms to the system of social welfare to address what Beveridge identified as the “five giants on the road of reconstruction“: Want, Disease, Ignorance, Squalor and Idleness. Published during World War II, the report promised rewards for the public’s wartime sacrifices and was overwhelmingly popular with the public. After the war, the Beveridge Report was underpinned by the Keynesian economic revolution and emerging post-war consensus, which put the state at the centre of economic management, facilitating the most successful period in capitalist history, the ‘Golden Age of Capitalism’. In turn, it formed the basis of the reforms of the post-war Atlee Labour government, which included the expansion of National Insurance and construction of a new social security system, the creation of the National Health Service providing free health care at the point of use, and the mass building of social housing, among much else. 

Today, while the challenges are different to those we faced after World War II, the scale, urgency and need to re-build British society and economy are of the same magnitude. We don’t have bombed cities to re-build or wounded to tend, but after four decades of neoliberalism our communities are broken, inequalities of health and wealth are rampant, rates of poverty and deprivation are through the roof, our social security system is one of the weakest in the OECD and is porous beyond effectiveness, work doesn’t pay and housing is unaffordable, technological change and globalisation threatens employment, and our economy is deeply wedded to unsustainable processes that damage the environment.

In the same spirit as in the 1940s, we need a Beveridge Report 2.0. 

Holistic, democratic, driven by science and the needs of the people, it should articulate the key challenges facing Britain today, work in partnership with stakeholders – charities, local authorities, small businesses, marginalised communities and citizens – to develop policy recommendations that tackle those challenges at a system level, and in so doing, provide a framework for how we Build Back Better from the pandemic and meet the challenges of the twenty-first century in a sustainable, equitable and effective way. 

Whatever policies are the outcome of such a process, we can draw inspiration from the fact that already the world is awash with transformative ideas, policies and movements that put the needs of society and environment above markets, nativist nationalism and ‘business-as-usual’. From housing co-ops in Copenhagen, universal childcare in Norway, free buses for all in Tallin, Estonia, alternative ways of funding adult social care in Germany, to the universal basic income, alternative measures of economic development, movements around the Green New Deal, and the principle of Universal Basic Services

Transformative politics may be expensive, but it is an imperative. While British left-wing politics has struggled to find answers in recent years, the question of how we afford such change has always been simpler to answer than most give credit to. The logics behind ‘austerity’, that if we take on too much debt in the UK than it’ll sink our economy, has always been a sham. The Bank of England already pays for government spending without increasing debt and it can continue to do so, by shifting the focus of quantitative easing to supporting the real economy, rather than financial markets. And there are very real ways to take back some of the wealth accumulated by the richest in society – such as wealth taxes, regulatory and tax changes for the financial sector and multi-national corporations, and closing tax avoidance and evasion loopholes – it’s just that successive governments have made the political choice not to do so. 

When our newsfeeds are dominated by a seemingly-never-ending stream of bad news, when our government has only contempt for truth and law, and when the political opposition seems flaccid at best, it can be easy to slide into a state of hopelessness. Yet, the ideologies, structures and institutions underpinning the status quo have only ever been the product of political choices, regulatory changes and competing interests. Meaningful changes to the way our economies are built, along with the ideologies and doctrines that underpin them, can and do happen. Just as the 1930s Great Depression and World War II provided fertile soil for the social democratic and Keynesian revolution, the prolonged period of crisis we’ve been going through since the 2007/8 financial crisis provides ample opportunity and justification for change.

With enough courage and creativity, focused effort to organise ourselves, and some good-fortune to capitalise in the next election, we can ensure the vulnerable do not have to suffer without help, we can re-balance the economy to cut inequality and poverty at source, and we can Build Back Better by re-invigorating the British welfare state for the twenty-first century. 

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