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.