[GegenStandpunkt Index]

Great Britain — the pioneer of modern social reforms
A model lesson on the magic formula for how to use wages and the social welfare budget as weapons in global competition

[Translated from GegenStandpunkt: Politische Vierteljahreszeitschrift 1-05, Gegenstandpunkt Verlag, Munich]

With their common market, the European states have removed tariffs and trade barriers to set down the same conditions for competition for capital based in Europe. But they didn’t come to an agreement concerning the working class. For the treatment of labour, the member states have reserved special rights for themselves so that they can use all elements of the proletarian standard of living as instruments in their competition against each other. Great Britain has even refused to sign the European Social Charter, however limited it is, and is adamant that no regulations imposed by the European Union should come in the way of national self-assertion. Today, “pro-European” Blair is just as determined to defend the British right to “opt out” against Brussels as “Euro-sceptic” Thatcher was in her time. He, too, insists that only reckless treatment of the working population ensures the nation’s competitive edge, his prime objective. And he sees himself corroborated by the course of events.

Hardly a day goes by on which Her Majesty’s first Minister does not declare his pride in the economic situation of the United Kingdom: “Britain has a lot to be confident about. 2 million people are in jobs. Only the UK has seen sustained growth each and every quarter for the last 7 years — a record that no other country in the G8 can claim. … Britain is working.” [1] Gone are the humiliating days of economic decline — since the mid-90s it’s Germany that has been branded the “sick man of Europe.” The entire nation is united in what it considers the very reason for its successful economic recovery: As early as 20 years ago, Great Britain took on all the social reforms which the continental states have yet to undertake, Germany more than any other. Great Britain was the first country to adopt the stance that the working class’ traditional standard of living amounts to a luxury that is detrimental to the nation’s success, so paring it down is the fundamental lever for halting and reversing the national decline. By applying this remedy, Great Britain has managed its unparalleled revival so that the European nations cannot help but express their greatest respect for this uncontested model for their own domestic reforms that they consider long overdue:

A decade of growth — reforms and modest demands by the people have paved the way” was the title of a country report in a large German national paper (FAZ, 01 Nov 2004), and it continues: “Great Britain is in fine shape. The economy is growing, the unemployment rate is low. The country is still reaping the benefits of the reforms of the Thatcher era. The liberalisation of the economic system that she initiated has led to great prosperity.”

The German chancellor is in total accord, and he makes no bones about how he envies his mate Blair for his arch-conservative predecessor in office. Schröder’s answer to the question why the Labour Party was in much better shape than his Social Democrats and was going to win the election, despite the anger about Blair’s participation in the Iraq war: “In Great Britain, the reform of the systems of social security had long been completed before Tony Blair, i.e. in the Thatcher era. And Labour had the chance to rectify the mistakes that had been made in the Thatcher era. Correcting a reform is much easier than making one.” (Süddeutsche Zeitung, 2 October 2004)

‘Easier’ or not — the successors of the Iron Lady are already undertaking certain reforms of a reform that serves as a model to others. The United Kingdom provides plenty of study material not only for the ruinous effects that the calculated reduction of the cost factor labour has on the workers themselves, but also for the counterproductive effects it has on the very purpose for which the reforms have been made, namely the solidity and the prosperity of the British economy. Moreover, what becomes clear is that once the ruling body of a country decides to pursue the course of such reforms, it will never ever —not even in the face of undesired side effects —contemplate a fundamental correction but will rather focus all its efforts on perfecting this course.

“Thatcherism” — a giant reform to gear up the imperialist basis of the nation

At the start of her term in office in 1979, Thatcher took stock of the devastating state of the nation: “Britain is a nation in retreat!” The continuous decline of the economy was not only increasingly diminishing the proceeds from global business for the British nation; the capacity to enforce order worldwide, imperative for an imperialist power like the UK, had also suffered all along. Thatcher took it as a matter of fact that her United Kingdom still had great plans for the future in the global world of business and force: expanding its privileged partnership with the American superpower in the cold war; proving its military capacity to impose its own order in the Falkland war; and last but not least establishing its role as co-leader in the competition among European states. Her diagnosis of continuous defeats in the international competition between states was only the prelude to a giant reform project. The Iron Lady undertook to shake up the entire internal economic structure of the British business location so that it might again serve to the satisfaction of the nation’s exacting imperialist demands.

The first target of reform was the struggling state-owned or state-subsidised industrial base. Whole regions in middle and northern England, Wales and Scotland depended on the coal, steel and shipbuilding industries, and a sizeable part of the British working class was earning a crust in these sectors. However, the sector that provided the energy and raw material basis of British capitalism was in itself no source of profit; on the contrary, as in many other countries it only represented a growing expense item in the national budget. If it doesn’t yield a profit, it has forfeited its right to survive in the market economy — this was the Iron Lady’s maxim for her all-out attack on entire industrial sectors, including the wage earners employed there. In place of “outdated” heavy industry, it was now North Sea oil, the nation’s status as a global financial centre as well as “sunrise technologies” like the “life sciences” that were to provide the national basis for capitalist growth and to turn the nation into an attractive location for foreign investment. Winners of global competition, multinationals from all over the world — American computer companies, Japanese car makers or German electronics conglomerates — were to invest in Britain. In order to turn Britain into an attractive location for foreign capital, Thatcher was determined to impose a radical cut in national wages. Last, but not least, “Thatcherism” was the first step towards a gigantic privatisation programme. Public services — ranging from postal and telecommunications services, water and power utilities, to rail and air transport, until then all state-managed and co-financed by tax revenues — were offered for sale to cash-rich investors. First, however, the public services had to be cleared of the employees’ vested rights that were no longer acceptable, so that private capitalists could make a decent profit with a reduced and cheaper workforce formerly employed by the state.

The second grand scheme for Britain to regain its appropriate position in international competition was the “reform of the systems of social security.” Thatcher dismissed the increasing public expenditure for state benefits to the capitalistic poor as unproductive costs, and she scorned all the steps taken by former Labour governments, and even by Tory governments, to rescue the national budget by capping the demands for benefits within the social welfare system. She regarded corrections like these as “half-hearted” and called all people “wets” who kept supporting the outdated notion that was once the foundation of the welfare state: i.e. that the capitalist mode of production has ruinous effects on the direct producers and requires state intervention to restore a working class useful for the needs of capital and to maintain social peace. For the Iron Lady, the reverse was true: what had made Britain poor was the consideration it had shown for the situation of the working class; what promised a revival of the British economy was an increased poverty of its proletariat and a fundamentally dismantled social welfare state. In due consequence, she radically cut social welfare payments and reduced the number of people entitled to benefits according to the maxim that those who don’t make all possible efforts to find a job at any price don’t belong to the “deserving poor” and thus forfeit their right to receive welfare benefits.

The fundamental pre-requisite: breaking union power

From the outset, Thatcher was absolutely convinced that an official decree by the government to revitalise the nation’s capitalist sources of wealth, and to downsize the British economy and privatise the public services for this end, would be insufficient as long as the professed enemies of the government, the trade unions, were still in a position to obstruct her modernisation programme. The head of British government had always been adamant that in order to carry out her radical social reforms, the unions had to be curtailed. After all, the workers affected by her reforms had a powerful organisation on hand in their trade unions, which were hardened in battle and also prepared to fight, and which stood up against the state ordinance of wage dumping and layoffs. Moreover, they were radical opponents of Thatcher’s agenda: the paradigm shift in the social welfare state that declares that the provisions workers have to make for the inevitable cases of need in their career in capitalism to be the “own responsibility” of those who cannot afford them. There was no question for the Prime Minister that her objectives — lowering national wage levels, liquidating unprofitable industrial sectors and privatising traditional government tasks in infrastructure — all these were a question of power, i.e. they required breaking union power. The Iron Lady’s mantra — “The solution to the union problem is the key to Great Britain’s recovery” — was a proclamation of class war from above against the trade unions and constituted the first step of her national reform project. Pulling the teeth of the trade unions was the all-important prerequisite for successfully executing her programme, with all its accompanying cruelties. For the British trade unions had never shown the mature behaviour of democrats that was expected of them. On the contrary, they had always misused their political licence to compensate for the superior power of capital, and they had in an irresponsible way chosen to misinterpret their task by staging radical, sometimes uncompromising wage disputes on behalf of their members. Quite in contrast to their German counterparts, who have always behaved very responsibly as “partners” in collective wage negotiations by holding back their demands for the benefit of corporate profits and economic growth, and for the sake of social peace.

In line with her radical programme, the Iron Lady undertook to “solve the union problem” with a vengeance, to break union power and to expropriate vested proletarian rights in nationalised industries that were under her direct control. At the same time, she encouraged the capitalist class to fight the class war with unfettered radicalism. As capitalists don’t have to be told that twice, they suspended their acknowledgement of union power. They set out to demolish the unions’ footing on the shop floor and to fundamentally shift the conditions of exploitation in their companies to their advantage. In this struggle, the state took sides and acted as the powerful agent of the liberty of capital. By employing the force of the law and of the police — even military force, when necessary — the Iron Lady secured victory for the capitalist class in this confrontation.[2] The final big battle against the “enemy within” ended with a crushing defeat of the miners’ union NUM in the great strike of 1984/85.[3]

This cleared the way for her planned gigantic modernisation programme regarding the imperialist basis of the nation, and no one has intended to fall back behind her achievements since then. Thatcher’s magic formula for modern social reforms — break union power politically, use wages as the all-important factor in competition, and use social expenditure as a means in the global competition of and for capital — not only convinced her political rivals on the British Isles, but ultimately put an entire current of bourgeois politics, namely classical social democracy, on the dung heap of history.[4] Since then, this has become all the rage all over Europe.

The Labour Market

The national achievement of a “deregulated” and “flexible” working class

“Working longer hours for less money” has long been a reality in Great Britain. Since the Thatcher era, the political managers of the British Isles have ruled over a “deregulated” labour market and highly “flexible” employees. Gone are the days of the “stoker on electrical locomotives,” the 5-o’clock tea break on the assembly line, and the greatest number of strike days in Europe. The modern British worker has dispensed with his historical rights and binding collective agreements, and he obeys his employer’s dictates with respect to payment and working hours, so that in due consequence his wages are among the lowest, but his working hours definitely among the longest within the European Union.[5] Since Thatcher’s time, the British nation counts to its most valuable assets a working class which works full-time or part-time on command — whether they are lowly paid men or even lowlier paid women[6] — and which then again spends longer hours per week than the 48 granted by EU legislation in factories and offices whenever capital requests so. Foreigners no longer look down on “British conditions” with derision and contempt, but look up with envy and appreciation.

“It is quite obvious that when the Blair administration was instated it found a labour market that was completely different from the one that Schröder will be faced with in the worst case. 18 years of conservative governments have lowered wages in Great Britain, relaxed labour protection laws, weakened the unions — and brought about a controversial “job miracle.” Supported by strong economic growth, the number of the registered unemployed has massively decreased in past years. However, many jobs don’t provide a living wage.” (Expert commentator in the German newspaper Die Zeit shortly before Schröder was elected chancellor, 10/1998).

The British labour market has always been “deregulated” in one important sense: “free collective bargaining” ensures that negotiating wages and working conditions is a direct power issue within the company, whereby threatening a strike or actually going on strike on the part of employees is as accepted an instrument in their struggle as are lockouts on the part of management. No law in Britain compels the parties in industrial disputes to reach an agreement, unlike the German law on collective bargaining, for example, which permits strikes — if at all — only as a means of last resort, and which ties any wage settlement reached to the obligation to keep industrial peace. Not having this kind of “regulation” was once considered the gravest disadvantage of the British business location, resulting in millions of working days lost through strikes, yet allegedly allowing British unions to fight for proletarian vested rights and to defend them despite their apparent inappropriateness for the nation’s capitalist progress. But since the Iron Lady broke the power of the unions, thereby “liberalising” industrial relations, the typically British system of “free” wage agreements is now seen as full of advantages: the capitalists are in the comfortable position to decree pay, working standards, working hours, and holidays for their workforce in accordance with the needs of profit accumulation — neither restricted by sector-wide collective wage agreements, nor by welfare-state considerations that govern the laws for working hours and dismissals, nor by co-determination rights. A “deregulated” labour market has wage-dumping potential, which its national administrators value highly not only because of its effects on the domestic capitalists’ balance sheets, but also because of its power to attract foreign capital, which didn’t miss the opportunity to invest in the British Isles, where in international competition wages are low and working conditions so attractive.[7]

Thatcher’s legacy to her successors was a labour market that generates an ever-growing army of wage earners who simply can’t get by with the wages they are paid, and who are called the “working poor.” There are more than 2 million of them on the labour market, in addition to the approximately 1.5 million registered unemployed who belong to the active ‘reserve army’ and to the ‘dead weight’ of 4 million Britons who have entirely dropped out of the labour market and rely on income support.

Social welfare policies of New Labour secure these achievements: “welfare to work” and statutory minimum wage for the “working poor”

New Labour embraced the “legacy of Thatcherism” — i.e. millions of redundancies that are the result of the successful resuscitation of the business location Great Britain, and a guarantee for continued wage dumping — and used it for its own political purposes. Blair, for his part, is convinced that the more than 5 million Britons eligible for unemployment benefit or income support are an unacceptable burden on the social welfare budget. His predecessor may have kept on cutting back unemployed benefits and welfare payments; yet the ever-growing number of beneficiaries has simply annihilated any positive results of her “austerity budget.” Instead of “financing unemployment,” the state should provide “work incentives.” This is the new general welfare policy of New Labour, for which it claims a copyright as Europe’s modern social policy.[8] “Welfare to work” means in plain terms: the state cuts back on state benefits, thus compelling the unemployed and the recipients of welfare benefits to take on work — for which they will receive money from the government but only if they manage to find a job. The purpose of the Labour government is to save more money in welfare payments than, on balance, it spends on additional measures to create jobs; but, more importantly, it turns the millions of unemployed and recipients of welfare into a huge reservoir of lowest-wage earners — candidates for a new type of special exploitative jobs, which from the very start are not to be mistaken for employment that provides a living wage. “The best way out of poverty and social exclusion is employment” (Tony Blair) — even if and especially when this way into employment leads straight back into poverty, and produces millions of “working poor.”

For these people, New Labour’s offer is yet another highlight of modern social policy, the “national minimum wage.”[9] For more than two decades, the level of national wages has been successfully lowered, consequently leaving a sizeable number of people with jobs in the lower ranks of the job hierarchy with an income inadequate to support them and their families. The paid wages no longer achieve the social effects that the political power requires of them: housing misery, child poverty today and old-age poverty tomorrow, deprivation and widespread criminality — all these are the effects of unhampered wage dumping brought about by government and managers. The national minimum wage introduces a bottom line for lowering the national wage level, yet at the same time encourages all employers to bring wages down towards this mark. Last but not least, New Labour’s “national minimum wage” defines the point at which in Great Britain “exploitation” and “poverty” begin: at less than £4.85 (2004) per hour for an adult wage earner.

No sooner had the minimum wage been introduced than the next “need” for “corrections” arose. The state-guaranteed income for the “working poor” could not even cover the costs of the bare essentials of life. Needless to say, simply raising the minimum wages is a burden that corporate profits cannot be expected to shoulder. Instead, New Labour stumbled upon a contradiction: on the one hand, the state played an active role in impoverishing millions of families by taxing low wages; on the other hand, these additional tax receipts had to be re-disbursed in the form of income support for the impoverished population. The 2 million employed in the low-wage sector have a social obligation to perform after all, namely to maintain their families and to bring up their offspring in a responsible manner. With this obligation in mind, New Labour launched a programme against poverty in working families. The “Working Family Tax Credit” is a tax allowance, introduced in 1999, which is made effective through the employer and which increases the pay after a means test has proved beyond doubt that the income in fact represents poverty. It is meant to provide working families with an extra £24 per week and a guaranteed minimum weekly income of £180. By so doing, the government gets rid of the “poverty trap,” a term that it uses to indicate a state of things annoying for the state: that single parents in particular who live off welfare are by no means better off if they take on a poorly paid job, and consequently don’t bother taking one on at all. From this point on, an extra £24 a week for a low-wage job is indeed an offer that welfare recipients cannot turn down, or else they risk their welfare payments being curtailed or entirely cut. Fighting “social exclusion,” New Labour’s motto, is a very cheap thing indeed.

The national fight for a cheap people in times of economic boom

Thus, the number of the “working poor” has been continually rising in the middle of the longest economic boom in British history. The rich are getting richer, and the poor are getting poorer — this fact, of course, should not be taken as an argument against the magic formula for using wages and the national budget as weapons in the global competition, but rather as an argument for it: “Britain works!” (Tony Blair, succinctly.) The chief administrator of the national economy took the offensive, denying any hopes that lowering national wages would have an end once the economy, on which everything depends, was neatly growing again. He praised himself for having achieved “full employment” with his government — which is defined in the UK as less than 1.5m unemployed and an unemployment rate of less than 5% — but promptly lamented the “shortage of labour,” which raised fears that an increasing demand for labour could lead to rising wages and salaries. In this case, the Labour government was anything but happy about the much-praised “market forces” and their “free interplay of supply and demand,” but rather took them as a serious problem. The price of labour is not allowed to follow the same law as other kinds of prices! That is to say that low wages, once the proclaimed Thatcherite remedy to lead the national capitalism out of its crisis, cannot be simply returned to the repository of a “heartless” capitalism once the nation’s economy has done a successful turnaround. Quite the opposite is true: They are an indispensable, permanent lever that each government applies in all stages of the capitalist economic cycle. In boom times in particular, the state has to use all its might to ensure that capitalist progress neither results in improving the material situation of the working class nor jeopardises the advantages gained in international competition. The danger that the economic boom and the decreasing number of the unemployed could threaten to diminish the pressure that the industrial reserve army exerts on wages is a challenge that calls for the government to use all available means to counteract a rising national level of income.

Where the state was still the employer, the Labour government set an example for the capitalist class that easily matched the Iron Lady’s toughness. It took the firemen’s demand for higher wages as a welcome opportunity and used the Fire Brigades Union as a warning to others. John Prescott, former trade unionist and later Deputy Prime Minister, broke the strike with military force. Where the state organised the social conditions of exploitation, it became active and fought the “shortage of jobs” which British managers had increasingly been complaining about. The Labour government used the recent EU expansion round to open the British labour market for Eastern European labourers, who are willing to work for unrivalled low wages. In contrast to Germany and most other old EU states, which restrict the free movement of job-seeking citizens from the new member states by introducing a transition period of up to seven years, Tony Blair allowed working immigrants from the Eastern European states to enter the country without any restrictions. Since May 2004, about 100,000 Eastern European labourers have added to the number of people in low-wage jobs, taken on jobs as cleaners in hotels and hospitals, or been hired as seasonal workers on farms. By importing cheap labour from abroad, the British state ensures that the next increase of the national minimum wage will at best offset inflation.

The housing question

Home ownership and mortgages — a British peculiarity concerning the conditions of reproduction of labour power

Proletarians have no property, but in Great Britain they are proud home owners. While in Germany nearly one third of all households live in a home that they own, more than 70 percent of British households own their own dwelling. While it is true that even in the nation that invented capitalism the wages paid by employers are not high enough to cover the elementary need for a roof over one’s head, they simply have to be high enough to do just that. An extensive business sector that ranges from building societies to banks and insurance companies offers its services to support the needs of the working population. The proletarians’ housing shortage provides them with a sound basis for their money business. Their mortgage[10] loans allow people without property to purchase a home. But this comes at a price: a significant proportion of employees’ disposable income goes directly into mortgage servicing, which has a beneficial effect on the banks’ balance sheets. The percentage of his monthly income a Briton pays directly to his bank and does not have at his disposal for other needs, is dependent on the national interest rate, and changes continuously with it. As a rule, the acquisition of property is financed with variable-rate loans. Fluctuating mortgage payments directly determine the disposable purchasing power of households, hence the national standard of living. If interest rates are low or even decreasing, they amount to a wage raise from an indebted house owner’s perspective, while increasing rates of interest eat up any pay increase. Thus the disposable income from which a British employee is forced to make a living is not only a variable dependent on the profit calculations of his employer; but at the same time, it is also a variable that depends on the profit calculations of building societies and banks.

Rising and falling property prices have the same contradictory effect on income and the standard of living. Rising house prices in times of low interest rates — as could be seen in the past 10 years of the British “property boom” —not only reduce monthly mortgage payments. The security of a property whose value has increased also allows house owners to take out even greater loans to finance deferred consumer spending. As a result, British households had amassed an impressive 1 trillion pounds of private debts by 2004 — a significant factor in the national economy whose significance in boosting purchasing power, i.e. domestic demand, is highly appreciated by domestic experts, but which periodically has devastating effects on these households. Collapsing house prices do not only leave heavily mortgaged home owners with liabilities that easily exceed the current value of their property — a serious financial difficulty called “negative equity” in plain banker-speak. More often than not, this economic plight also ends up with the bank repossessing the property, yet leaves the former owner of the property on a mountain of debts which he still has to service. The Bank of England’s decision to raise interest rates, which usually marks the beginning of collapsing house prices, has a crucial impact on the lives of British employees and home owners: will they be able to keep the homes they need for their reproduction, or will they lose, together with the roof over their heads, their entire ability to reproduce themselves.[11] Such is the precarious state of a working man’s life once the proletarian has become a proud home owner.

The British solution to the housing question

In the 21st century, the vast majority of the British working class can rank themselves among the respectable class of homeowners. However, this does not derive from something like a distinct British national character and its proverbial “My home is my castle.” On the contrary, it is the final result of British housing policy in a dual sense: a) the state pursued a policy of public housing for half a century, which b) the Blair government terminated. After World War II, a government run by the Labour Party set out to relieve the notorious housing misery of the British working class by providing council housing. Before that, the working class had no other alternative than hand over the greater part of their wages to capitalist property owners or profit-oriented building societies for the right to dwell in dismal homes in working class quarters that more often than not were dark and dank and invariably much too small. By building council houses and subsidising rents, the local authorities provided an affordable alternative to the financial calculations and the price dictates of private landlords, who called for ever higher rents the greater the housing shortage and the more slum-like the dwellings. ‘Social housing’ programmes eventually resulted in nearly a third of the British population living in council houses at the end of the 1970s, and only 10 per cent living in private renting. It was the declared aim of Lady Thatcher’s conservative government to cut back state subsidies for council housing, and at the same time to increase owner occupation, and it implemented this policy with carrots and sticks. The 1980 “Housing Act” introduced the right for tenants to buy their formerly rented “council house” while massive rent increases for “social housing” meant that tenants were lured into a new career as homeowners and debtors with commensurate mortgages.[12]

The transformation of council tenants into a nation of indebted home owners, pushed forward by the Conservatives, has been fully endorsed by New Labour since it also recognises the service that millions of home owners provide for a flourishing property market as well as the capital sectors that thrive on it, the building sector and estate agents.[13] And when the same homeowners keep relying on house prices that have now been increasing for 10 years to take out ever higher loans and to use their credit-based solvency to support a “robust” domestic purchasing power, thus contributing to the prosperity of British capital — then the social housing question has once and for all been settled to the government’s satisfaction because it has stimulated growth. Or nearly so.

The housing question revisited by New Labour

Even New Labour has considered the need to modify the housing situation as inevitable. This need arises from the booming house market — good news for the national economy — which can be equally credited to the Conservatives and to Labour (after all, both have established and advanced it). The quadruplication of house prices over the past 10 years has enabled house owners to swell their accounts, at least on paper, but at the same time first-time homeowners looking for a home are finding it increasingly difficult to acquire property. Thus, the housing shortage is increasing, particularly among young employees and families whose income is simply not high enough to take out the required mortgage. “Climbing up the property ladder” — the career that starts with a small and therefore cheap terrace house and, with rising income, gradually continues with a bigger and better house in a better location — has become unattainable. Thanks to successful privatisation, affordable council housing is hardly available any more. Renting from a private landlord is no longer a viable alternative for the majority of home seekers when a monthly rent of up to £3000 for a small terrace house in London or the South East is the norm — with a 6-month renting term as a rule. In the midst of the longest boom in British history, even young people who earn good salaries can no longer afford a home — for the growing number of people employed in the flourishing low-wage sector, buying a home is an illusion anyway. As a result, New Labour is prompted to intervene and remedy the situation.[14] A return to the times when the government subsidised council housing is strictly ruled out for the party. Rather it favours the construction of homes that even ‘low-income families’ can afford through public-private partnerships (PPPs) — yet another model concept of modern welfare policy that the German red-green government has recently been eager to copy. In this concept, the state provides public land on which privately-owned building companies erect cheap houses which they project to market for some £60,000. The government is trying to relieve the most pressing housing shortage, particularly in the booming South-East of England with its rising demand for qualified employees, as it is becoming a serious obstacle to the mobility of the British labour force that has been made flexible so successfully.

But the government sees more problems in an entirely different corner of the housing market. It foresees the risk of the long-term ‘property boom’ turning out as a ‘bubble’ that is bound to ‘burst’ sooner or later. However, it is less concerned with the foreseeable ruinous results this will have for the respectable class of ‘homeowners’; after all, this means that millions of heavily indebted homeowners will eventually have to declare bankruptcy, and large numbers of forced sales and repossessions will be on the agenda. The government’s true concern are the repercussions such a crash may have on national growth. More than anyone else, it is the British Chancellor of the Exchequer, Gordon Brown, who identifies the British answer to the housing question, i.e. the transformation of the housing shortage into a flourishing and flexible property market, as the reason for the much-lamented instability of economic growth in Britain — the notorious ‘boom and bust’ cycle. The government sets out to break this cycle by using fiscal and monetary policies to slow down the rise in house prices and by fighting the ‘volatility’ of the property market through incentives to swap property loans with variable interest for loans with long-term fixed interest.[15] Thus, the question whether the working man gets ‘a decent home at a decent price’ finds an answer inherent in the economic system he is in: what ultimately settles the housing question is not the supply of decent quality and affordable prices for a roof over one’s head, but rather whether the housing market makes a contribution — a guaranteed one, if possible — to the profitable flourishing of credit in the country, which is the prime source of capitalist growth. The new definition of “social” is: everything that serves as a lever for economic growth and for the prosperity of capital. Even a Labour government will accept no other definition of social.

The pension system

The basic state pension — an achievement to serve capitalist growth

Lady Thatcher was the first to successfully apply this recipe: cut pensions drastically and force the working population to take out private pension provisions. For more than twenty years now, Britain’s pensioners have been enjoying the exemplary social welfare conditions that the red-green German government is just now trying to bring about with a series of reforms. Pensioners in poverty are such a widespread phenomenon in the British Isles that German trade unionists and welfare associations caution their government about a similar risk of its intended reforms — they simply cannot imagine that any government would seriously allow for such dismal living conditions for its pensioners in its plans. In the British pension system, pension payments are made up of a basic pension that is independent of previous income plus an income-related additional pension; on average, the two amount to some 37 per cent of final wages. At retirement, an ordinary employee’s state pension is frequently below the official poverty line and is supplemented by welfare benefits so that in the end it barely suffices to scrape a living.[16] After retiring, a British person without any property of his own and without supplemental private income in old age will very quickly join the ranks of 3 million pensioners who have to eke out a bare existence below the official poverty line, and have to make ends meet with £112 a week. Nor is life in old age much of a luxury for the rest of the working class that has been made redundant. Quite in contrast to the small but noble minority of 2 million out of a total of 11 million pensioners whose class situation has enabled them to make private provisions and who now dispose over an average annual income of some £45,000.

The British state has long since parted with its position that the pension system should enable its citizens to get by after they have finished their active working lives. The “Iron Lady” once more was the first to turn around the post-war consensus shared by all political parties that the welfare state needed a pension system to manage the poverty pertinent to capitalism, partly even to mitigate it. She found this social institution a convenient instrument of capitalist growth. Seeing that the NIS contributions collected from employees[17] shrank in line with the decline of British industry, her government countered with a radical pension cut. The alternative of increasing the revenue of the pension fund and burdening employees or taxpayers with higher pension contributions was out of the question for a government that had just set out to lower the national wage level.[18]

By drastically reducing the state pension, Thatcher introduced a new type of insurance for old age, the private pension. The British working population is thus forced to put aside a substantial amount from their paltry wages, at the expense of their present livelihood, in order to save up for their future livelihood. Moreover, private pension schemes open up bright business prospects for the capital markets, prized by Thatcher as one of the strengths of the British economy. The state as the “ideal general capitalist” directs substantial parts of national wages to the capital markets and, with its political guarantee of a continuous flow of money to life insurance companies and pension funds, is instrumental in the accumulation of a capital stock of £700bn — the largest of its kind worldwide after the US. This fashionable method of turning poverty into capital investment thus kills two birds with one stone: It reduces the state expenditure to manage poverty among old people, and it gives London a considerable competitive advantage in the international competition between financial centres.

New Labour’s management of the “pension crisis”

Millions of pensioners who have not been able to build up any personal savings are now living in destitution. For New Labour, this “legacy of Thatcherism” is neither a “mistake” nor does it prompt the party to make “corrections of the welfare state” — after all, the pensioners who are poor today have been told for 25 years that they can no longer depend on the state pension and that pension provision is their “own responsibility,” which they have failed to take on. But now the same fate threatens those sections of the working class who earn a better wage and who have dutifully made private arrangements for their pensions. The crash on international financial markets widely annihilated share portfolios that had been meant for old-age provision — investments in corporate pension funds as well as small investors’ deposits. Company bankruptcies vaporised not only jobs, but also occupational pension schemes for employees. Of the many life insurance companies that went bankrupt, the bankruptcy of Equitable Life — the oldest insurance company in the world — was the most spectacular only because it was the largest, with more than one million insured, who were forced to accept a substantial cutback of their policies. Such is the result when a government founds the old-age provision of the principally poor majority of the population on the speculative profits of financial gamblers. As the portion of pay that the welfare state collects and manages in funds is increasingly insufficient to secure life in old age, the “high returns” that high-risk capital investments promise are meant to fill that gap — but with the result that not only do these high returns fail to materialise; but what is more, the original investment — too small from the outset — is also lost in the gamble.

Naturally, the government does not even think of revoking its shining pension reform. But it finds itself obligated — vis-à-vis the “pension crisis” —to limit the damage it has caused, and to advance the reform. There is, first of all, the battle for the occupational pension funds. As a result of the annihilation of capital that took place when the stock market crashed, but also of the “contributional holidays” that companies granted themselves in the years of the stock boom, there is now a financial gap to the tune of £54bn. In view of the ballooning assets of company pension funds, employers simply cut back their share of the contributions while employees still had to pay their full compulsory contribution straight out of their gross income. Corporate executives now use the deficit in company pension funds to fix employee contributions, but not their future payouts. Moreover, newly employed workers are excluded from the occupational pension schemes. As a result, 60 percent of these pension funds are now in closure. In addition, more than 100,000 employees have largely lost their pension claims since 1997 after their firms went bankrupt. Therefore, the Blair government passed a law — not for the present victims, but anticipating future victims of foreseeable company failures — which requires the enterprises to pay into a provisions reserve fund whose aim it is to guarantee employees of insolvent companies 90 percent of their claims on company pensions, effective as of 2005. If claimants affected in the future can figure out the imminent reduction of their occupational pensions today and don’t have to expect zero pension benefits, then the company pension funds crisis has been solved to the government’s satisfaction.

The crisis affecting private old-age provisions is yet another case for New Labour in which the only way out of it is ever more privatisation. If equity funds and pension funds provide only little “social security” and yield ever fewer returns, then it is the responsibility of the population to save more money for old age from their wages. The Labour government could do no more than support them with tax concessions, which it had axed only previously by pointing at the booming stock market. Additionally, the government appointed an “Independent Pension Commission” to analyse the pension crisis, and to come up with suggestions how to overcome it. The Commission has arrived at the conclusion — both realistic and promising — that:

the underlying problems have been getting worse for 20 years at least, but were masked by the temporary impact of the baby boom generation, by a failure to anticipate the scale of life expectancy increases and by the irrational equity market exuberance of the 1980s and 1990s.” To overcome the “pension crisis” the government proposes the “options” of: “either: pensioners becoming poorer relative to the rest of society; or taxes/National Insurance contributions devoted to pensions rising; or savings rising; or average retirement ages rising.” The Commission considers “the option of poorer pensioners as the least attractive” “some combination of higher taxes/National Insurance contributions, higher savings and/or later average retirement age will be required.” (Independent Pensions Commission: First Report, 12 October 2004)

The Health System

The National Health Service (NHS)

The UK has always pursued its own course regarding the management of public health. The national sum total of wages is not sufficient to maintain and restore the health of the working class, yet it is forced to do just that. Distinct from its European neighbours, the British state does not organise this contradiction in the form of statutory contributions deducted from employees’ gross wages, supplemented by equal contributions by employers. Instead, it finances the national health system through public spending, for which the entire population in their quality as “taxpayers” are required to pay. More than 80% of the NHS’ expenditure is financed by the national budget. In principle, any citizen can use the services of the NHS. Medical treatment, operations and therapies are as free today as in 1948, when the NHS was founded — notwithstanding the costs that patients have had to carry for some time for co-payments for medicines, glasses, and dental prostheses.

In comparison to other countries, the public health service is cheap for the British nation.[19] Cheap for its employers in the first place, who do not have to burden their payrolls — as in other countries — with “additional” wage costs used for the welfare state’s service to the health of the human material exploited and accordingly worn out under their command. Cheap also for the state itself which, in its efforts to maintain and restore public health with minimal costs, benefits in three ways from the monopoly that the NHS holds. Firstly, the state directly subjects the definition of which medical services constitute public health and which do not to its own political directive — in contrast to the German health system, where the volume of services and benefits as well as the costs are ascertained in a competitive struggle between health insurers, medical professionals/hospitals, and pharmaceutical companies. Secondly, the NHS is basically the only employer for all doctors in the country, who have to content themselves with the status of ordinary public servants and with commensurate salaries that used to be markedly lower than the salaries earned by their peers in countries like Germany or the US. Not to mention other medical staff — from nurses to midwives and physiotherapists — who have to render their services for wages far below the national average. Thirdly, the NHS acts as a monopolist vis-à-vis an entire economic sector — the pharmaceutical industry — thus keeping price levels for drug consumption below those in other countries. It bars pharmaceutical companies from freely tapping into the liquidity pooled in the national health system and from raking in extra profits with correspondingly high prices for their medicines, as is common practice elsewhere.[20] As a nationally orientated bulk buyer, the NHS ensures relatively low prices for medicines while guaranteeing at the same time a solid domestic basis for globally operating businesses. This has helped British pharmaceutical companies like Astra-Zeneca or Glaxo-Smith-Kline to accumulate capital to magnitudes that “global players” require to exploit the world market for their own and their nation’s benefit.

Labour’s efforts to achieve more “efficiency”: prescribing “more market”

The health service is the only section of the British welfare state that was not subjected to radical reform by the Thatcher government. She dropped her original idea of privatising the entire NHS — not because the Iron Lady had feared outraged British citizens, who still hold the free-of-charge health service in high esteem as a “symbol of the welfare state,” despite heavy criticism of long waiting lists for operations and of run-down hospitals; after careful consideration, the self-professed champion of privatising public services had instead reached the conclusion that beyond any doubt the state-run NHS was cheaper for the nation than a privately-organised health service.[21] In its place, she prescribed an “internal market” for the NHS in order to increase its efficiency. According to her creed that the rules of money and competition alone can guarantee efficiency, she transformed health, within the NHS, into a “commodity” that follows the economic “law” of “demand” and “supply.” Hospitals now represent the “supply” side, and the local health authorities along with the doctors registered with the NHS now represent a “demand” for health services that have to be paid for. In this construction of an “internal market,” however, patients are excluded from representing a “demand” because for them health principally is not meant to be a commodity that has a price but a free welfare service. Where health has become a marketable good, hospitals that have been upgraded to so-called “NHS trusts” with limited administrative and budgetary autonomy become “service providers” that compete for solvent “customers,” i.e. the local health authorities, whose health budget provided by the state is notoriously tight.

If the NHS and its “internal market” had not been perfect and complete by the time New Labour took office, the party that is so keen on “market values” would have had to invent it. But as it is, Mr Blair has to grapple with the inevitable effects that develop when the decade-long “underfunding” of the health system is promised to be healed by enforced competitiveness, and when the long-established central planning inside the NHS is replaced by an internal market.[22] The notorious list of complaints — run-down hospitals, month-long waiting lists for operations, a lack of serums for immunisations — has not become any shorter. On the contrary, a few new items have entered the list — the necessary result when traditional state planning is axed — such as the wasteful doubling of capacities for medical treatment in marked contrast to the simultaneous shortage of medical services. Since for New Labour a return to more central planning is out of the question, the government finds itself now in a situation where it is forced to do what is deeply against its ideological grain: it has to inject more budgetary funds into the NHS. The treasurer, Gordon Brown, raises the budgetary means allocated to the NHS from £42.4bn in 2001 to £56.7bn in 2004. His aim is not only to shorten the notorious waiting lists, but also to augment the notoriously low salaries in order to prevent the exodus of qualified medical staff to other countries, and last but not least to bring the British health service in line with the EU standard for medical performances. The conservative governments in power before Labour are now seen as “having ruined” the NHS by “excessive saving”; New Labour considers this as part and the legacy of the national economic crisis it has inherited. Today, after the economic crisis has been overcome and Britain has been reinvigorated, the government raises public health to a level that bares every comparison with its rival nations. This, in itself, is a sign of a successful nation.

While the chancellor provides all the necessary budgetary funds, Tony Blair sets out to “fine-tune” the NHS that has been reformed to include “more market.” The NHS trusts retain their autonomy. Their financial and operational independence is even extended by “foundation hospitals,” the founding of which was highly controversial, and which have the right to borrow money on capital markets. At the same time, contracts that stipulate quality standards are made with hospitals to ensure that the NHS provides “value for money.” Thus, quite a considerable part of this “money” goes into administering, controlling and managing the quality of the “internal market” while patients can continue indulging in the “value” of trailing behind on the waiting list for their operation. Whoever wants to speed things up and has the money to do so can use the option to take out private insurance, just like with his old-age provision. Thus, the division of the wealthy and the poor is also advancing in the health sector.

This is something eagerly taken up by the attentive German public, which would really love to prescribe its citizens not only a medicine of thrift comparable to the British national health system, but along with it for the citizenry the fitting exemplary moral which it has made out in the British model:

“The health system is more economical than in Germany. Whoever does not want to risk being put on a waiting list takes out private insurance. … The Britons by and large accept this system because the population had to suffer such great pains caused by the dreadful state of the economy during the years before Thatcher that she was able to push through reforms unthinkable in Germany even today, but which reformed and liberated the British economic system. Unlike the Germans, though, the Britons in the seventies and eighties were not talked into believing that everybody could have the same excessive demands on social security. Thus, Great Britain is devoid of that social envy that is crippling reform in Germany.” (Frankfurter Allgemeine Zeitung, 01 November 2004)

If and when the victims of social reform swallow all its hardships, and even accept all that is “necessary” as just and fair, then the nation is in perfect shape.

Notes

1 (PM’s speech at the Lord Mayor’s Banquet, November 15, 2004) British politicians and public opinion don’t miss any opportunity to refer to the growth of the British economy, now in its tenth year, and to growth rates twice those of Germany, to the long-lasting surplus in the national budget (until 2001), and to a rate of unemployment of less than 5%, lower than in other European countries. They tot up the British national product to the second largest in Europe, 3/4 the GDP of Germany, the supreme economic power.

2 The anti-union laws enacted by the Thatcher government aim at rendering strikes more difficult or even impossible. They criminalise strike activities and even allow confiscating union property. Although under the parliamentary law of 1906 the unions had some protection from judges passing common law judgements by granting immunity against employers’ claims for damages in the wake of strikes, the Thatcher government revoked essential parts of this barrier. Trade unionists now lose their immunity if they don’t follow certain rules before calling a strike: ballots are required by law, and secondary picketing is prohibited. For the first time since 1906, union property can be confiscated. Unions can be made liable for their members’ activities in an illegal strike. The “Iron Lady” turned companies into union-free zones by laws that made union admission to companies conditional on legal restrictions that are ever harder to meet. For instance, more than 50 percent of employees have to be union members, and the majority of employees must vote for union representation in a secret ballot.

3 This is the result of the successful class struggle from above: In 1979, 54 percent of employees were trade union members, and the total number of employees in British labour unions was 13.3m. By 1991, trade unions had lost one third of their members, and in the 1990s the percentage of employees organised in unions sank to below 30 percent. The percentage of union-free companies rose between 1984 and 1990 from 27 to 36 percent. “Closed shops,” in which trade union membership is a prerequisite to employment, have virtually ceased to exist. Industrial disputes and working days lost to strikes have drastically declined — down to the European average. As early as 1990, only 10 percent of employees were paid salaries and wages that had been negotiated in collective wage agreements with unions for the industry or the region; 40 percent were in-house agreements negotiated between “shop stewards” and management; and 50 percent were paid outside collective or in-house agreements, solely at the dictate of management — their number is increasing.

4 The trade union movement was so unequivocally and thoroughly defeated by the united fronts of capital and state that Labour, still in opposition, changed its name to ‘New Labour’, and called for a sweeping revision of its close ties with the unions. After all, it was the unions that once established Labour as their party in order to enable the proletariat organised in Trade Unionism to exert some influence on state power. And it is the unions that even today largely provide the party funds so that in return they secure themselves a leading role in all important party decisions. All this was extremely annoying for a party on the long march back to the seats of power, fearing nothing as much as a reputation that it still was not a people’s party but an outdated class party. The job of breaking union power in companies that the conservative government had so successfully pushed through was completed by Labour, which curtailed the power of the unions within the party. Tony Blair, while still in opposition, spelled out his programme to the unions: “I want to be quite blunt with you about the modern relationship between today’s Labour Party and the trade unions. There was a time when a large trade union would pass a policy and then it was assumed Labour would follow suit. Demands were made. Labour responded and negotiated. Those days are over. Gone. They are not coming back.” (Speech to the Congress of Transport and General Workers Union 1995, quoted in: Governing as New Labour: Policy and Politics under Blair, ed. By Steve Ludlam and Martin J. Smith, Basingstoke, 2004, p 71.) Following these lines, the party voted to remove the union block vote, in which the unions pool their members’ votes — after all, 5m out of 6.8m Trades Union Congress members are also party members — to reduce the union vote at party conferences to 50%, and to delete the notorious article 4, which called for nationalisation, from the party statutes. For its turning away from socialist and social-democratic values, New Labour came up with a new brand name: the “Third Way” beyond socialism and capitalism.

5The UK’s long-hours culture means that on average many of us are working a 43.6-hour week. Our counterparts in the rest of Europe do 40.3 hours. The last seven years have seen a significant rise in the number of employees working in excess of 48 hours a week, rising from 10% in the late 90s to 26% now. … The number of people working a long week has also jumped. Estimates from 2000–2002 suggest that those clocking up 60 hours a week have increased by a third, which equates to one sixth of the UK labour force. … Recent surveys estimate that only 44% of workers use up their full entitlement to annual leave. Reasons cited for not taking paid holiday often include a heavy workload or fear of upsetting the boss.” (The Guardian, August 20, 2005)

6 The first female Prime Minister also played her part in realising equal rights in the workplace and helped British women get their fair share of low wages. In 1991, two out of five British employees were women, compared to one in three in 1971. Only 14% of employees had part-time contracts in 1971, their number rising to around 25% in 1991. The majority of the 1.2m newly created jobs between 1981 and 1991 were for part-timers. In 1991, one in eight persons who had gainful employment was self-employed while in 1971 it was one in twelve.

7 In the 1990s, Great Britain became the European country with the largest influx of foreign direct investment. Therefore, despite the near-total eclipse of its ‘national’ automotive industry, the United Kingdom is still the second-largest European car production site after Germany, with manufacturing plants of GM, Ford, Nissan, Toyota, Honda and BMW (Mini). Foreign direct investment flows in particular into financial services, IT, the pharmaceutical sector and biotechnology, but also into the privatised sectors of transport and infrastructure such as power, water and gas utilities.

8Labour came to govern in 1997 with an explicit aim of moving people from welfare into work. This was consistent with the overarching aim to control the amount of public spending, but it was also consistent with a second aim, which was to tackle the problem of social exclusion. Following the convention that employment is the best route out of exclusion and poverty, welfare reform set about reaching this goal by means of work-centred policy measures complemented by policies to improve the financial incentive of moving from benefits to work, and minimise the risk of in-work poverty.” (Ludlam and Smith, op. cit., p. 151)

9 The introduction of the “national minimum wage” — called for by the unions — was an election pledge by Labour in 1997, and has been a law since 1999. The Low Pay Commission — in which representatives of government, unions and employers have a seat — sets the minimum wage and reviews its annually. “The national minimum wage is an important cornerstone of Government strategy aimed at providing employees with decent minimum standards and fairness in the workplace. It applies to nearly all workers and sets hourly rates below which pay must not be allowed to fall. It helps business by ensuring companies will be able to compete on the basis of quality of the goods and services they provide and not on the low prices based predominantly on low rates of pay. The rates set are based on the recommendations of the independent Low Pay Commission.” (www.dti.org.uk — DTI website on Employment Relations — National Minimum Wage) Its regulations stipulate: main adult rate (from 22 years): £4,85; 18 — 21 years: £4.10; 16-17 years: £3.00, introduced October 1, 2004.

10 “Mortgage” denotes both the nature of the loan in which the creditor reserves the title to the property until the debt has been redeemed, as well as the borrowed amount and the servicing of the debt. The term was imported from the French in the 15th century and is composed of the words “mort” = death and “gage” = promise or pledge. It denotes the obligation which the debtor assumes with buying a home and with which he no longer pledges his life to his creditor, but no less than his possessions and his income.

11 “People who bought at the peak of the rise were left with properties worth less than the price they paid and therefore loans higher than the value of the property. Figures from the Bank of England revealed that, in 1993, 1.3 million owner were in this situation, known as ‘negative equity.’ … The 1980s and 1990s saw a rapid rise in the number of repossessions of houses by building societies for the non-payment of mortgages. In 1997, 32,770 homeowners had their houses repossessed and 236,900 people were more than three months behind with their mortgage payments and therefore in danger of repossession.” (Pat Young: Mastering Social Welfare, Basingstoke, 2000, p. 131) During the last housing market crash at the end of the 1980s, the number of homeless families rose from 56,000 in 1979 to 128,000 in 1989. According to official figures, 370,000 people were sleeping rough at that time. About 200,000 people were charged with vagrancy by the Thatcher government.

12 “The 1980 Housing Act established the ‘right to buy.’ Under this clause of the Act, tenants can buy their homes with discounts of 33 per cent for those who have been tenants for three years, rising to 50 per cent for tenants of thirty years’ occupancy. … People who wish to take up this option are also entitled to a mortgage which covers 100 per cent of the cost of the property and the legal fees involved. … It was Conservative policy to encourage tenants to buy in two ways: first, through the discount scheme, and second, by increasing rents. In the period 1979–1980, council rents rose by 117 per cent. … Between April 1997 and the end of 1991 some 1.8 million council housing association and new town homes were sold in Great Britain.” (Pat Young op. cit., p. 127)

13The 1990s saw a coming together of Conservative and Labour approaches to housing as Labour withdrew their commitment to public housing. … Government funds have been channelled into building societies and the tax relief on private housing has constituted a major housing subsidy. In 1990–91 the cost of the government of mortgage interest tax relief (known as MIRAS) was £8.3 billion. (Pat Young, op. cit., p. 129)

14 Deputy Prime Minister John Prescott commented on the housing situation at the Labour Party conference in 2004: “He said the number of people unable to afford a home was rising to unacceptable levels. If you’ve got a home, the cost of the mortgage is at its lowest for a generation. But if you haven’t, the cost of buying it is at a record high. More and more people want to own, but just can’t afford it.” Last year, he said, the number of first-time buyers fell by a record 27%, while the average price paid by a first-time buyer in London stood at £218,000 — a threefold increase since 1997.” (“Prescott shifts on new home policy,” The Guardian, Monday, September 27, 2004)

15 In his “reform agenda,” Chancellor Brown announced a programme to “stabilise” the housing market, in which he aimed at “balancing” supply and demand (in the previous decade, house prices rose 20% annually) and at restructuring mortgages (interest on mortgages is not fixed long-term but can float according to the current base rate). The government believed this to be the most important reason for the crises in the past: “In Britain, the combination of house price inflation and volatility — and the impact of both on consumption — has generally led to interest rates higher than other countries. Indeed most stop-go problems that Britain has suffered in the last 50 years have been led or influenced by the housing market.” (Chancellor Gordon Brown in his ‘Statement on UK membership of the single currency’, June 9, 2003.)

16 No wonder that “every winter, more than 20,000 older people die … from cold-related illnesses.” Many of them simply don’t have the wherewithal to heat their homes. According to “Help the Aged,” the United Kingdom has the “highest percentage of such deaths in the European Union.”

17 The national pension scheme is the only sector of the national insurance system which is not tax-funded but organised as a pay-as-you-go system with compulsory contributions from wage and salary earners to the tune of 9% or 13%, respectively, of gross income. The British state has never bothered to give the national insurance system the appearance of being equally funded by employers and employees, which for some time was held in high esteem in the German social market economy. It will thus not be bothered with complaints from its capitalist class that so-called ‘non-wage labour costs’ are excessive — the noble employers thoroughly approve of skimpy British state pensions and other wage-related costs that are low in international comparison, and which they welcome as a competitive advantage that the British business location enjoys.

18 “The government has refused to restore the link between pensions and earnings, which was broken by the Thatcher Government, although the Labour Party Conference voted to restore this link in September 2000. Labour was widely criticised for its meagre increases in the basic state pension — in 2001 it was raised in line with inflation by just 75p per week, and in April 2002 by £5 a week for single pensioners and £8 a week for couples.” (Pat Young, op. cit., p. 155)

19 Figures provided by the OECD regularly reveal the surprising cheapness of the British health system by international standards, particularly in view of the high percentage of old-aged people. In 1990, health expenditure accounted for only 5.2% of the GDP — compared to an OECD average of 5.6% — which was way below the European level. The relative figures for 1999 were: 8.2% (OECD) and 6.7% (UK). The US spends the same percentage of its GDP on its very limited public health system as the UK spends on its NHS — but on top of that, the same amount is spent privately in the US.

20 “Whilst the NHS is a state-run and state-financed organisation, it relies on profit-making companies for drugs, equipment and some services. The multi-national companies which manufacture drugs count amongst the most profitable enterprises in the world. Drugs prescribed by GPs cost £3.6 billion in England and Wales in 1992–93. This is 10 per cent of the NHS budget. … In 1999 a new deal was struck between the government and the drug companies to set profit margins on new drugs. The deal is estimated to save the NHS £200 million a year.” (Pat Young, op. cit., pp. 335–336)

21I believed that the NHS was a service of which we could genuinely be proud. It delivered a high quality of care — especially when it came to acute illnesses — and at a reasonably modest unit cost, at least compared with some insurance-based systems. … Consequently, I was much more reluctant to envisage fundamental changes than I was in the nation’s schools. Although I wanted to see a flourishing private sector of health alongside the National Health Service, I always regarded the NHS and its basic principles as a fixed point in our policies.” (Margaret Thatcher, The Downing Street Years, p. 606)

22 Under the title “A New Start,” New Labour reviews the conservative reform of the NHS. “Keeping what works” is the motto for the forced push towards more market and more competition, expressed in more stilted words: “The Government recognises the intrinsic strength of decentralising responsibility for operational management.” It “discards what has failed”: “The internal market split responsibility for planning, funding and delivering health care between 100 Health Authorities, around 3500 GP fundholders (representing half of GP practices) and over 400 NHS Trusts. There was little coordination,” and patients’ needs were not satisfied. As a practical consequence, New Labour kept the “internal market” despite its “fragmentation” but created a new mechanism in order to newly coordinate the isolated components of the NHS: “To overcome this fragmentation, in the new NHS all those charged with planning and providing health and social care services for patients will work to a jointly agreed local Health Improvement Programme.” (The New NHS, Government document, quoted in: Margaret Jones and Rodney Lowe, From Beveridge to Blair, Manchester University Press, 2002, p. 101) What a complicated thing this is: Introducing “more market” in order to make things less expensive, i.e. ‘more efficient’!