David Boyle: Can we save the middle classes?
David Boyle has just completed the Boyle Review on Barriers to Choice in public services for the Treasury and Cabinet Office. He is a former Lib Dem parliamentary candidate. His book Broke: who killed the middle classes? is published later this month.
You don’t have to be a Conservative to want a ‘property-owning democracy’, though many Conservatives do
The phrase was popularised by Anthony Eden at a conference speech in 1946 and became increasingly associated with conservatism, with a Big C and a small c. It was also the heart of what Margaret Thatcher believed.
When, in the autumn of 1979, the group of policy-makers around Geoffrey Howe and Nigel Lawson met at the party conference to discuss ending exchange controls, they were unsure whether she would back them.
But they were absolutely sure of one thing – that she had an absolute commitment to home-owners and to the middle classes.
So looking back three decades, there is a paradox about the legacy of those years and the decisions taken since. The middle classes felt better as their sat on homes worth increasingly large sums – but what about the new generation?
If I had bought twenty years later, I would now be shelling out monthly mortgage repayments of £700 a month or more, and I would have to do something I enjoyed a good deal less. People would no longer be able to read what I write. This might make them happier, but it would make my life poorer (selfish, I know).
As for my children, aged eight and six, I cannot now imagine how they will be able to live a middle class life in London.
So now we need to name the unease – despite Margaret Thatcher, despite Tony Blair wrapping himself in a flag of the middle classes, I am far from sure whether middle class lives, and middle class values, will survive the next generation.
This isn’t just about house prices. The collapse of defined contribution pensions, the panic about education, the strangulation of professional independence by New Labour targets, all have a role to play – but house prices are central.
If they go up at the same rate as they did in the past 30 years for another three decades, the average UK house will be worth £1.2 million – and it seems pretty clear that salaries will not rise nearly as fast.
Yes, we used to think that the housing market would never cut itself adrift from the need for people to come in on the bottom rung, but buy-to-let mortgages and foreign investors have shown otherwise. A typical London deposit is now £85,000.
Yes, people will be able to use these windfalls to help the next generation – but they will also need that money to plug pension gaps and pay for social care.
And yes, the low building rate hasn’t helped – but inflation is also caused by too much mortgage finance money chasing too few goods. When people work out what they can afford on the basis of both partners working, house prices rise to take account of it, and so the cycle goes on – in retrospect a terrifying rack for the middle classes.
It was part of the bigger vicious circle that was caused by people desperately stretching to afford the home they wanted, and which was outpacing their income as they watched – a spiral that keeps on spinning: smaller houses, bigger loans, a bigger multiple of salaries, higher prices, smaller houses and so on.
That is why only half of London’s homes are now owner-occupied. It explains a little why London is rapidly shifting from property-owning democracy to a city of supplicants to the whims of rental agents.
It is not the kind of independence that home ownership was supposed to bestow on a burgeoning middle class – and is why UK home ownership falling steadily, and is now lower than in Romania and Bulgaria.
Nigel Lawson acknowledged his role in creating the inflationary spiral. “I accept my prominent part in this though I was by no means alone,” he wrote in 1992.
In his autobiography, which he was writing the previous year, he described the explosion of mortgage lending in the 1980s as “unprecedented and unforeseen”, saying that the end of the decade – with the huge explosion in house prices which he presided over as Chancellor – were a “once and for all occurrence”.
That wasn’t so. The inflationary spiral was turbo-charged again under Blair and Brown.
This is why policy-makers need to look more closely at the middle classes, and whether they are struggling now because of the recession – or whether this is a bigger trend.
Trying to isolate the reasons for the struggle led to my book Broke: Who Killed the Middle Classes? (published on 25 April by Fourth Estate)
Not everyone will agree why I believe it has happened – whether it was an unexpected side-effect of the abolition of the Corset in 1980 (the system that restricted foreign money coming into the UK housing market) or the way that Big Bang was put into practice in 1983. Or the effect of Gordon Brown’s iron control of public services.
Not everyone will agree with me what to do about it either.
But I am hoping they will agree that, the month that Margaret Thatcher died, we need to think about her central purpose – to broaden the middle classes and support people to own their own homes – and why those purposes seem now to be unravelling.