Almost half of Britain’s households live in areas where economic growth isn’t translating into better living standards, according to consultancy PwC. Its report puts the figure at 12.5 million households, or 46 percent of the total. The findings cut through the familiar promise that expanding business activity will automatically bring prosperity to the people who do the work.
Every region in the north of England, the Midlands and Wales had household spending power below the national average. North East households were £1,542 a year below it, a gap of 6.6 percent; the North West was £1,493 behind, and Yorkshire and the Humber £1,917 behind. In the South East, spending power was £2,154, or 9 percent above average, with London also comfortably ahead.
PwC measures what households have left after taxes and housing costs, adjusting for household size and composition. This brings the calculation closer to what people can actually spend on food, energy, transport and other expenses. Scotland and the South West were slightly above the national average, which the report attributed to lower housing costs and smaller households.
The economy grew by 1.2 percent during the first half of the year. Yet PwC says “only a fraction” of a rise in GDP reaches household spending power. GDP measures economic output without telling us how its proceeds are divided. Higher output can swell profits while wages stagnate, and rising rents can swallow pay increases before workers see any improvement in their lives.
Workers’ labour creates new value, but ownership gives employers the power to claim the surplus beyond what they pay in wages. A worker can produce more in an hour without receiving a corresponding increase in pay. How much of the benefit workers secure depends on the balance of power between labour and capital, including their ability to organise collectively. There’s no automatic mechanism that hands productivity gains back to them.
Inequality also runs through the supposedly prosperous South. PwC recorded average annual disposable income of £35,448 in Richmond, compared with £18,384 in Hammersmith and Fulham. Even these local averages combine workers’ incomes with those of business owners and landlords. Living in a wealthy region doesn’t give a cleaner or care worker ownership of the wealth around them.
Britain’s geography of wealth has been shaped by imperialism. London’s role as a financial centre connects it to profits drawn from labour and resources overseas. Capital flows towards the returns available to its owners, with no obligation to sustain the communities whose labour generated earlier profits. Wealth can accumulate in the financial centre of an imperialist state while industrial areas lose investment and workers across the country struggle with living costs.
Prime Minister Andy Burnham’s answer centres on devolution and his promise to create “the conditions for good growth in every postcode”. The government points to No10 North and says English mayors will receive a share of income tax revenues. PwC itself wants local authorities to retain more revenue from growth and have greater freedom over how they spend it.
These changes leave the central power of employers, landlords and investors intact. A mayor can gain a larger budget while remaining dependent on private companies’ decisions about where to invest and whom to employ. Devolution can place local authorities in competition to attract the same mobile capital, each pressed to make its area more profitable for business. Greater reliance on local revenues can also favour places that already have the strongest tax bases.
Rising government borrowing costs expose another part of that power. As October’s Budget approaches, higher interest rates on new borrowing and refinanced debt threaten to absorb resources that could fund services. Institutions buying and selling government debt can influence the terms on which the state borrows without winning a single vote. Communities are promised a greater say while financial markets retain substantial power over the government’s choices.
Conservative leader Kemi Badenoch has called No10 North a “gimmick” and accused Burnham of misunderstanding growth. “He thinks that if government spends more money, we will all get richer – that is not how this works,” she said.
Her criticism sidesteps the class content of public expenditure. A subsidy that increases a company’s profits and a public service that reduces a worker’s living costs both involve state spending, with different consequences for who benefits. Businesses themselves depend on publicly funded infrastructure and services. An argument confined to whether the state spends more or less conceals the interests that spending serves.
PwC wants growth judged by whether it produces better lives. Under capitalism, however, the governing consideration for private investment is the return to its owners. Workers’ living standards remain subject to a struggle over wages, rents and public services even when production expands. Burnham can announce better GDP figures from Downing Street or No10 North; neither address changes who owns the economy.
