Stop patronising ‘Leavers’, start making the economy work for all

25 July 2016

Analysis of the European Union referendum result has invariably focused on the divisions it exposed. And whilst it is over simplistic to see ‘Remainers’ as the haves and ‘Leavers’ as the have nots – or Brexit as just a protest vote – the apparent correlation between areas with low skill, low income labour markets and strong ‘Leave’ votes is unavoidable.

To give one comparative example. Sixty nine per cent of North East Lincolnshire voters put their cross in the ‘Leave’ box – amongst the highest of the ‘Leave’ votes. In Oxford just 30 per cent voted ‘Leave’ – one of the lowest. In 2015, gross weekly earnings for full-time workers in North East Lincolnshire were 20 per cent lower than in Oxford, and whilst 61 per cent of workers in Oxford were employed in senior and professional roles between April 2015 and March 2016, fewer than a third were in North East Lincolnshire. In June 2016 the proportion of unemployed benefit claimants in North East Lincolnshire was three and half times that of Oxford.

So whilst the referendum result itself may have surprised many in Westminster, that large swathes of the nation feel ignored and left behind should not have. It has long been clear that the economy, public services and government do not work for all.

More than one in five British workers were in low paid jobs before the recent introduction of the National Living Wage, well above the OECD average. In fact, wages were stagnating long before the 2008 financial crash. The benefits of globalisation (in trade and the movement of people) and advances in technology have not been equally distributed. GDP may now be 4.7 per cent higher than its pre-crash peak, but household income still has not recovered – this means many families are poorer today than nearly a decade ago.

Arriving at Downing Street, the new Prime Minister launched her premiership by committing to “do everything we can to help anybody, whatever your background, to go as far as your talents will take you” and to “make Britain a country that works not for a privileged few, but for every one of us.” It was an inspiring speech, but her vision was not unique. In 1990 John Major promised “to build a society of opportunity”. In 1997 Blair stated that “this new Labour government will govern in the interests of all our people — the whole of this nation”. Cameron in 2015 said “we will govern as a party of one nation…It means giving everyone in our country a chance so that no matter where you’re from you have the opportunity to make the most of our life.” Successive Prime Ministers – from Thatcher to May – have promised to unite the country. Actions, as always, will speak much louder than words.

Ensuring growth and opportunity is spread across the nation does indeed mean rebalancing the economy, as many have loudly argued. Gross Value Added growth in 2015 was 3.4 per cent in London, compared to, for example, 0.9 per cent in the North East and 1.6 per cent in the West Midlands. Analysis by EY found that the North-South divide is likely to widen further over the coming years. Targeted investment and incentives will hopefully lead to greater regional economic growth, but the Government will have to look beyond the Northern Powerhouse to deliver increased wellbeing to the disillusioned many.

That is why public service reform has never been more important. Good schools, affordable housing, accessible healthcare and safe communities are all important to an individual’s wellbeing. As is the degree to which they feel they have control over their lives (“take back control” understandably struck a cord with people feeling powerless). Rewarding and secure employment is central to that.

Many of us take for granted the cheaper, more convenient gig economy, and see in it greater flexibility, even freedom. But how many of us would accept a job without basic safeguards such as sick pay, never mind benefits, or the insecurity of fluctuating income? And how are those people displaced from the traditional economy being supported to move into alternative employment? As self-employment continues to grow – accounting for 83 per cent of new jobs created in the three months to May 2016 – how much of it is about entrepreneurship or flexibility, and how much is necessity? The Centre for Retail Research estimate that the number of high street shops will decrease 22 per cent by 2018 – as more of us shop on-line, what happens to the retail workers whose jobs no longer exist? As wealthier households are able to take advantage of migrant workers, such as cleaners (one of the most common migrant jobs), and the net benefits of immigration are extolled, how many of us think about the impact on semi- and unskilled workers who see their wages depressed?

As Matt Hancock highlighted in a post-referendum speech to Reform, government must think about “the people who find themselves disrupted: in the wrong business, in the wrong town, at the wrong time, on the wrong end of globalisation.”

In his speech, Hancock noted that 90 per cent of the new jobs created in 2014-15 were in skilled occupations. Narrowing the skills gap will be essential to improving people’s lives and ensuring the UK is an attractive place to invest. In a recent speech to the IntoWork 2016 conference, for example, Mark Rogers, Birmingham City Council Chief Executive, forecast that over the next decade Birmingham would face a surplus of 24,000 low skill workers and a shortage of 46,000 high skill workers. A CBI survey of 500 companies published last week found 77 per cent expect to create more higher-skilled jobs in the coming years, and 69 per cent are not confident they will be able to fill them.

To take advantage of this changing labour market and ensure all benefit, the Government should focus on three areas.

Firstly, slashing the attainment gap between free school meal and non-free school meal pupils – currently around 26 per cent at GCSE. The new Government should take seriously the Social Mobility Commission’s recommendation that “turbo-charged” financial incentives should be trialled as a way of getting the best teachers in to the worst schools – particularly outside London. They should also ensure pupils are developing twenty first century skills such as computer and data science.

Of course more students should be encouraged to pursue careers in STEM (science, technology, engineering and maths) subjects, and apprenticeships should be championed – though only in response to genuine employer demand. But it is adult skills provision that the Government must rapidly address.

This is the second priority: as traditional economy jobs decline, the Government must invest, in partnership with business, in enabling people to retrain to work in high-demand sectors. Welfare-to-work provision must be joined up with skills funding and the obsession with supporting young people at the expense of adults must be revised.

Thirdly, the Government must ensure a welfare system that works. Just as we must have the highest aspirations for disadvantaged children – and expect them to fulfill their potential – so too must we believe in the capacity of people that successive governments have left parked on benefits. Britain must not repeat the experience of the eighties when a transitioning economy led to high welfare rolls. There is nothing progressive about accepting – even advocating, as proponents of a universal basic income do – a life of benefit dependency. Work is key to people’s health and wellbeing, it helps provide self-worth, purpose and inclusion – “idleness” was rightly one of Beveridge’s five giants. Much more needs to be done to help those trapped on welfare to realise the benefits of work – starting with greater investment in welfare-to-work services (paid via payment by results to ensure the taxpayer funds success).

And work must pay. The National Living Wage will help, but the Government must rapidly explore how best to help people progress in work – again, access to skills development will be key. The Prime Minister should also take this opportunity to reverse the damaging cuts to Universal Credit work allowances which leaves low income, working families significantly worse off. Working hard should mean earning a decent living.

At her first Prime Minister’s Questions, Theresa May reiterated her promise to “exten[d] opportunity to all.” She must now lay out a vision of bold, ambitious public service reform to match that aspiration.

Charlotte Pickles, Deputy Director and Head of Research, Reform

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