The status quo is here to stay

12 August 2020

In the second of a four-part series, Ben Hunter and Chris Carlon discuss how the furlough scheme reinforces the socio-economic stat(e)us quo

To read the first part in this series, click here.

The Job Retention Scheme (JRS) is the government’s flagship COVID response programme, through which companies receive grants that enable employees to be furloughed on 80% of their salary up to a maximum of £2,500 a month. In sum, the state is paying private sector wages for an estimated 52% of British firms in order to prevent widespread unemployment and business failure. The Resolution Foundation estimated the programme will cost £46 billion across six months, but, given the program is now set to run for eight months at least, it’s clear the cost will likely be much higher.

The Institute for Public Policy Research (IPPR) notes how, in attempting to support households, the government had the option to either lower their costs or replace lost incomes. The JRS represents the latter of the two options and, whilst certainly necessary in order to prevent layoffs, IPPR’s research outlines how the policy’s distributional impacts maintain an economic system that is characterised by rentier extraction. They find that on average, working households spend £459 a month on mortgage, rent and private debt repayments. The implication of this finding is that 45% of the grant money given to households under the JRS will find its way to creditors, totalling £21 billion in a six-month lockdown. This choice to enable the continuation of rent extraction, an implicit bailout of creditors which places the economic burden onto those less able to withstand it, hits lower income households harder, as essential costs make up a greater proportion of the expenditure of lower-income households. In contrast, wealthier households are saving £200 a month, as their discretionary spending has fallen throughout the lockdown. IPPR conclude that the scheme can ‘therefore be viewed as in part an indirect means of protecting income streams for asset owners’.

Crucial to this analysis is the broader recognition that the UK economy is already deeply characterised by rentier extraction and that, through the JRS, the government is working to uphold this existing pattern of political economy. We posit that a true paradigm shift in state-society relations involves not just changes to policy, but a new governmental perspective on appropriate state-society relations; a bar not reached by the JRS despite its invasiveness, scope and cost.

Research by Manchester Metropolitan University describes this approach as that of a ‘night watchman state, preserving the order which had already been established rather than acting progressively via the state to improve society’. Progressive solutions outlined by IPPR include higher taxes on wealth and rent write-offs in the short term, followed by the introduction of alternative models in the long term, such as municipal and community-based ownership of housing and other assets. The furlough scheme, in comparison, is simply ‘pumping more money through a highly unequal economic system without changing the power dynamics within that system’. The furlough scheme therefore suggests that the governing practices of the post-crash era, the ‘inter-crisis period’, are thus still firmly intact, as there has been a temporary adaptation, rather than any renegotiation. A statist rear-guard, rather than a statist resurgence.

While Boris Johnson has praised the JRS for protecting around 11 million jobs, it’s worth noting that the maintenance of existing jobs simply maintains the status quo. Whilst this action was absolutely necessary, and the UK is yet to see the long-term policy changes which the programme may spur, this highlights the premature nature of analysis claiming an inevitable return of ‘big government’. There have been few signals from the government which suggest a forthcoming attempt to refashion the economy, as well as a recognition that the economy the JRS props up is unproductive and deeply unbalanced; around 58% of UK employment takes place in low-productivity work sectors, and 47% of all UK job increases in the last 10 years have been situated in the South East and London .

The Pandemic Response Displays the Problem of Centralisation

Under the UK government’s recent crisis-response, political capital is applied in order to sustain a certain pattern of economic power relations. But political power relations within the state itself are equally important, and the issue of centralisation highlights especially effectively the contradictions inherent in discussions of a ‘big’ or ‘small’ state. Colin Talbot, Professor of Government at Manchester University, argues that the government has organised the coronavirus response along the lines of ‘command and control’. This approach has been to centralise power, organise everything on a big scale, and impose ‘one-size-fits-all rules’. Talbot cites the example of expanding coronavirus testing capacity, which until April remained solely within the auspices of Public Health England – an executive agency of the UK’s Department of Health and Social Care -, who chose to build three testing facilities themselves rather than to utilise the existing capacity within the private and university sectors. This decision was later reversed, in part due to hospitals and laboratories increasing testing without any government direction and, as described by Professor Eleanor Riley, an infectious diseases expert at the University of Edinburgh: ‘It’s like hospitals have decided, ‘We’re just going to go ahead and do it.’’

Talbot comments that ‘one remarkable feature of the current crisis has been the degree of local  self-organisation’, with ‘local groups using Facebook and other platforms to organise themselves’. The decay of local government, a long-running trend severely catalysed by Conservative budget cuts totalling £16 billion over the previous decade , is the pivotal cause behind the necessity of local organisation. These cuts contributed to the UK’s already over-centralised political system, and the country’s lack of genuine regional government remains an outlier among OECD nations. Centralisation by definition means both an expansion and contraction of the state as resources are rechannelled and redefined for new purposes, a political decision which reflects the government’s pre-existing tendency to prefer centralisation over its alternative. Whilst increasing the scope of central governmental activity, this erodes the state’s local healthcare capacity, an example of the state becoming bigger in order to shrink. Bearing in mind Talbot’s assertion that ‘all public services are local’, it also raises questions about how centralisation may pose difficulties after the pandemic, particularly with regard to the distribution of ameliorative resources at the local level. The recent experience of Leicester city council, whose members have publicly aired their frustration at central government’s speed and accuracy in conveying information needed to fight the pandemic, doesn’t offer much reassurance.

Prime Minister Johnson’s recent pledge to conduct a Rooseveltian strategy of post-virus reconstruction, the first information about which is to be announced in the Chancellor’s autumn spending review, suggests a centralised approach will be maintained. Successive British governments have a consistent track record of neglecting those outside of London and the South-East. The Centre for Cities has found investment in R&D, to take one example, is overwhelmingly concentrated in a so-called ‘golden triangle’ of London, Cambridge and Oxford. Not only does this have negative impacts in terms of material inequality, but also on the type of work available throughout the country. Within this triangle, almost two-thirds of the job increases since 2010 have been managers, directors and professionals, who exist in an economy based largely on rent, with London house prices rising to 13.3 times average annual earnings – more than double the increase in the North West. Will Davies, building on Foucault’s conceptualisation and critique of  ‘human capital’, suggests that ‘human capital’ can work from home on full pay, even if they do substantially less work, because their employment rests upon a ‘moral and financial logic, that potentially produces more enduring bonds of obligation and duty…of mutual belief between capitals’.

In contrast, under this reading, labour’s value is purely transactional, existing solely in the time allotted and thus there is no justification for continuing to pay labour for more hours than is worked. This dominant logic of investment and return is visible in centralised public expenditure of the type Prime Minister Johnson insists will be Rooseveltian. Marianne Sensier and Diane Coyle, writing for Manchester University, note that because the state’s methodology for appraising potential transport spending takes into account ‘agglomeration impacts, dependent development and more productive jobs’, projects are approved more regularly in the South-East. In this part of country, the return on investment is inevitably higher given the region’s pre-existing success and greater levels of productivity, metrics which stem from and which reproduce a profit-driven approach to governance shorn of societal purpose.

No signals from the government thus far suggest any substantive changes to the state’s centralised approach to state-society relations that is primarily motivated by the return on investment. Under both the government’s furlough scheme and the centralising tendencies apparent in the government’s COVID response more generally, the departure from the past lies in the amount of spending and the specific policies it finances. We posit that a ‘return of big government’ necessarily involves an evolution in governing practices, and not just an expansion of any existing governing logic for any novel purpose. The following section sets out a number of the progressive ways in which this could take place.

To read the next part in this series, click here.