The death of the middle-class dream

To those who find it hard to make ends meet, I’m sure my middle-class worries are insultingly trivial. You’re having a hard time sending your kids to private school? Well, boo hoo. Cry me a river. But it’s all relative. To a Mauritanian peasant, the average British welfare claimant is as rich as Midas, and his concerns are as inconsequential as my own. Can’t decide which satellite TV package to get? Well, I haven’t eaten in three days, but gee, that’s tricky.

If you’ve worked hard to support yourself and your family, then the way of life you’ve strived to achieve is important. It’s what inspired you not to be a burden on others and to make a positive contribution to society. If everyone followed your lead, there would be fewer people struggling to cope and more fretting over trivialities – which could only be a good thing. And yet, there is a tendency for some to belittle the aspirations of the aspirational: to imply that until everyone is lifted out of poverty, no one should enjoy the trimmings of middle-class existence. But this is nonsense. You can’t, on the one hand, want people to be wealthier, but, on the other, criticise the benefits of wealth. Or, rather, you can, but it makes you an idiot.

I consider myself middle-class, although where I stand in that slightly ill-defined stratum, I couldn’t say. I haven’t benefited from inherited wealth and don’t come from a family that could ever afford to take affluence for granted. In fact, my generation was the first in my family not to know hardship. My maternal great grandmother was virtually illiterate and went to school shoeless. My mother grew up in a rented two-up-two-down in South East London, with six of them in the house. No one in my family has ever been to university, and until my sister took her A-Levels, no one had ever stayed at school beyond the age of fifteen.

My future prospects improved thanks my father, who started as an office junior and worked his way to the top. I might have enjoyed the benefits of his success, but I was brought up to respect money, to understand how it was earned, and to regard our way of life as something fragile that required constant effort to maintain. It was my family’s endeavours that taught me to despise the Labour-voting blue bloods who profess to care about the plight of the poor, but criticise the petit-bourgeois striving that promises them a way out of it.

Library Image © Mark Evans

Library Image © Mark Evans

In 1979, my parents moved our family out of West London to a leafy suburb. We lived in a detached 1930s house in a quiet cul-de-sac. My sister and I went to private schools. We had two holidays a year. We kept horses. For several years, my mother was a housewife, meaning our cosy existence was paid for exclusively by my father, who was by then a company director. Fast forward three-and-a-half decades and my wife and I live just three miles from my childhood home. In real terms, our household income is much the same as my parents’ all those years ago. We have two children and two cars, just as they did. But do we have a similar lifestyle to the one I knew as a child? If only.

Don’t get me wrong, we’re better off than many people, and grateful for it. Our two-bedroom Victorian terraced house is charming, if a little cramped. My wife’s car is new, even if mine is old and tired. I enjoy our annual holidays to Cornwall, but it would be nice to go abroad some day. We have a decent social life, but we don’t eat out as much as we used to. Our eldest daughter goes to a private school, but I’m going to have to sell a kidney when the youngest comes of age. As for keeping horses, fuggedaboudit. I’m more likely to eat one than own one.

So why is it so much harder for the middle-classes to achieve the standard of living their parents enjoyed? Certainly, more money is poured into propping up a bloated state apparatus than during my family’s 1980s heyday, which has a dampening economic effect. But I believe the most significant handicap we face today are property prices, since a nice house remains the centrepiece of middle-class aspiration, and its most substantial cost.

My parents bought their house in the ‘burbs for £43,000, or around £185,000 in modern money. The same house is currently valued at £600,000. That’s a 325% increase in value over thirty-five years. During the same period, average disposable income has roughly doubled, meaning that, relative to income, my parents’ house costs more than half a much again what it did all those years ago. My example is borne out by the official statistics. The house price to income ratio in 1979 was about 4:1. Now, it’s more like 7:1.

None of this especially matters if you got into the housing market before the boom, because the value of your property will have increased along with everyone else’s; but those who missed out are paying a terrible price. In 1996, first-time buyers would spend 17.5% of their take-home pay on their mortgage. In 2008, at the height of the boom, it was 49.3%. In London, the figure was a staggering 66%.

© Sludge G

© Sludge G

Houses, like any other commodity, are subject to the laws of supply and demand, and I’m not about to criticise that tried-and-tested mechanism. But there are many external factors which have an inflationary influence. For instance, as people’s fortunes improve, more of them join the property-owning class, increasing demand and driving up prices. But the economic growth than enables this change will tend to improve everyone’s lot, compensating for rising costs. Even the sale of council houses at knock-down prices wouldn’t have made a significant difference, since they weren’t part of the private housing stock until they were sold off.

In 1947, the Attlee government introduced the Town and Country Planning Act, which was part of the Left’s grand vision to put the state in charge of supply and to bring private developers to heel. It helped contain the urban sprawl, but has made keeping up with housing demand all but impossible. Even if protecting the countryside is important to you (and it is to me), there are plenty of brownfield sites that could have used for house-building, but stringent regulations and a lack of political will have all but ruled it out. Fewer new homes were built in 2013 than during any other year in the postwar period.

Other factors have also played a part. When Gordon Brown trashed the pensions system, many people began investing in property, leading to a ten-fold increase in buy-to-let properties and shrinking the number of houses available for sale. New Labour’s immigration policy and generous welfare system resulted in a population surge, which has put a strain on the housing market. The same government’s war on the family encouraged more people to live alone, further increasing demand.

However, I believe the lion’s share of the blame for our inflated house prices belongs elsewhere. Elements of the Left have always hated that observing prissy bourgeois conventions and honouring snooty middle-class values should reward people with a better quality of life. They saw no reason why the advantages of success should be denied to those who have not demonstrated the behaviour required to achieve it. The Boomer philosophy of getting something for nothing and screwing the cost became flesh under New Labour, who encouraged the banks to lend money to people, so they could access luxuries they would otherwise be unable to afford.

During his first year as Chancellor, Gordon Brown transferred the responsibility for bank regulation from the Bank of England to the Financial Services Authority, and curbed the central bank’s ability to keep asset inflation in check, by removing housing costs from the price index. In successive speeches at London’s Mansion House, Brown encouraged bankers to lend money as freely as possible, promising them “light-touch regulation”. Interest rates were then kept low to deter saving and encourage borrowing. The upshot was a credit bubble, which triggered a skyrocketing demand for property and sent prices into orbit.

A degree of sanity has returned since the economic crash, but property prices remain high and are on the rise again. And the reason for this is that our economy is still based on a hokey and corruptible premise. The money that banks loan to the public is not real. It is magicked out of thin air at the press of a button. As such, banks have more reason to lend money than they do to be prudent. When they issue loans, they encourage economic bubbles and make a mockery of the idea that a nation’s wealth is the sum total of its assets. This structural tomfoolery is the basis of our soaring property prices, and why the old virtues of working hard and living within your means no longer reap the dividends they once did.

For a long time, a degree of caution kept things in check; but opportunism, naivety and political ideology have taken us a long way from home. Until we establish an economy based on sound money, the way of life aspired to and achieved by my family and others will be beyond the reach of the vast majority of people.

7 Comments

  1. I agree with your analysis regarding housing.

    I’d like to add a few more thoughts:
    1. Houses are the only asset that easily allow geared investments by the public. Subsidised interest rates have therefore distorted investments into housing rather than other forms of enterprise. This malinvestment impoverishes us all.
    2. Our tax system makes it extremely inviting for foreigners to buy houses rather than store their wealth as gold in a vault or other assets. Hence the multi million pound west london empty houses, protected by our public legal and police system.
    3. Housing benefit discourages social mobility and prevents the poor or unemployed moving somewhere cheaper to safe money, and penalises low paid workers who have to pass by these subsidised houses on the commute home from their inner city place of work.

    Thus sound money, land value taxes and scrapping of housing benefit would help us all achieve a productive fulfilling life.

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    1. I couldn’t agree more! Subsidies distort the market. One other thing also that needs mentioning is the insidious rule that new developments need social housing.Imagine you have scrapped together the money to buy your house and discover when you move in you have “social housing” next door. People I know have fallen into this trap. If you are really unlucky your property becomes worthless because the ‘unemployed’ spend their time out on the street on their sofa or dismantle cars leaving parts and filth strewn over the car parking spaces….
      I remember John ‘boxer’ prescott suggesting higher density housing speaking from his palace in hull…o.k.for him but not for everyone else!

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      1. I can imagine social housing causing cultural niches – ghettos – where that kind of thing is done, but proponents of the rules you criticise would suggest that might mixing up the social and private housing prevents the formation of those ghettos, and that their rules are the solution to that problem that you’re talking about.

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      2. It is not up to anyone in government to decide on how people live,if they wish to live in squalor and filth then that’s their choice! It is also not within the remit of government to attempt social engineering at the expense of the hard working people middle class or otherwise.
        These people do not live next door to Clegg ,Osbourne ,Milligan’s or Cameron!
        And I can assure you that plonking them next door to someone with a clean tidy garden does not induce them to follow suite.

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      3. My own view is that people absorb ideas from their environment. For example, if a child sees a neighbour industriously tending their garden and enjoying a BBQ in the pleasant surroundings they produced, then this will endear them to investing in deferred rewards. It is not, however, a certainty and is greatly helped by genuine social contact over a period of time and yes, that does not follow from plonking people down in adjacent plots.

        So I agree and I disagree. This is certainly not the proper role of Government and for myself I have found a nice place in a ghetto of the industrious. I do not feel either lucky or guilty about that, I wanted and worked for it.

        I wonder though, what kind of solution we would support, if any, for the reformation of manners? I’m drawing a blank, which seems a shame.

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      4. To earn and keep the money that is required to live in a nice house, in a nice area requires people to observe certain values and disciplines. To simply give people the advantages of that observance without them having earnt it is patently wrong. They won’t become better people by living around those who have worked for what they’ve achieved. They’ll simply see the other people as suckers, and will continue to live a life of feckless abandon, as they always have. They don’t fear the consequences of their actions, so they have no incentive to change.

        If as a result of this, we end up with ghettos of prosperous, hard-working people and of poor layabouts, so be it. We should want people to move from one to the other, and we should try to create a society in which such movement is possible through ability and endeavour. A society that rewards effort and indolence equally is doomed.

        At some point during such discussions, someone always asks whether pigs make sties or sties make pigs. To that, I would simply say that the poor of fifty years ago didn’t live with anything like the mess and misbehaviour you find amid today’s social housing.

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      5. I find it interesting that those living a life of ‘feckless abandon’ may be acting in a completely economically rational way, particularly if they are effectively unemployable at a wage that would replace and enhance their state income significantly.
        Thus in a state with widespread intervention and a benefits trap who are the chumps – those who live day to day, knowing the state will look after them, or those working hard to provide for themselves and improve their surroundings?
        Contrast the upkeep and neighbourly manners in an outlying Singapore tower block with those in a UK sink estate to see how similarly designed buildings can express their surroundings in radically different ways.
        I suspect many of us on this forum know this, hence our passion for reducing the dyspraxic hand of the state on individuals in favour of the cool hand of the free market.

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