Socialist Appeal - the Marxist voice of Labour and youth.

Recent statistics about falling inflation, decreasing unemployment, and economic growth have been touted by both the Tories and bourgeois economists as a sign that their programme of austerity is working and that, after six years of recession and falling wages, things are starting to get better. But the official figures hide the reality that the vast majority of the population still find themselves struggling to cope with the biggest decline in living standards since Victorian times.

Earlier this week it was announced that the UK inflation rate, as measured by the Consumer Prices Index (CPI), fell to 1.6%. This is the sixth consecutive month that the rate of inflation has fallen, marking the longest consecutive fall since modern records began.

This news has been touted by both the Tories and bourgeois economists as a sign that their programme of austerity is working and that, after six years of recession and falling wages, things are starting to get better.

Yet, as with the much triumphed ‘recovery’ and supposed falling unemployment, working people up and down the country are undoubtedly wondering when things will start to get better for them. This is because - despite the optimism of official economic statistics - the vast majority of the population still find themselves struggling to cope with the biggest decline in living standards since Victorian times.

The real cost of living

The reality is that the official inflation statistics manifestly fail to reflect the real cost of living for the workers and poor. The government’s favoured measure of inflation specifically excludes housing costs, yet working families in the UK spend 40% of their income on housing, making UK housing the third most expensive in Europe. This is a product of our acute housing crisis, with sky rocketing rent and house prices making the roof over our heads increasing unaffordable. This means over a million working families are now reliant on Housing Benefit to pay their rent, an increase of over 50% from 2010. Such is the horrendous cost of housing that the homelessness charity Shelter recently published research that shows 3.8 million families are just one pay cheque away from losing their home.

Alongside housing, energy and food account for the biggest expenditure for workers and poor people. And like housing, food and energy prices are increasing at a far greater rate than the official inflation statistics. UK food prices have risen dramatically since 2007, increasing by over 30%, more than double the EU average. At the same time energy bills have risen by 37% since 2010. This placed hundreds of thousands of families over the winter in the position where they had to choose between eating and heating. Indeed food poverty is back with a vengeance, with 913,000 people reliant on parcels from food banks in the last year, up from 347,000 the year before.

Wages rising or inflation falling?

The news of (officially) falling inflation has been accompanied by headlines that “after six years, wages finally overtake inflation” - that is, official wage growth is finally higher than official figures for inflation. However, this says more about the low rate of inflation - which is itself a sign of the continued depression in the economy, with the enormous excess capacity in production (i.e. overproduction) putting a competitive downward pressure on prices - than it does about the level of wages, which have remained stagnant for many workers since the crisis.

Indeed, the BBC highlights that, “when bonus payments are excluded from the figures, wages rose by 1.4%, still below the rate of inflation”. And who, we might ask, is getting these ‘bonus payments’? Might it be the bankers, who despite being bailed out by taxpayer, continue to reward themselves handsomely for doing nothing but helping to bring about a state of financial ruin.

Futhermore, the BBC goes to mention that, “The Office for Budget Responsibility (OBR) has estimated that real incomes will not return to their 2009-10 levels until 2018 at the earliest.” Note: real incomes are estimated not to return to post-crisis levels, not pre-crisis levels, for another four years. Indeed, the BBC continues by mentioning that, “since the start of the financial crisis, real pay has fallen by a ‘colossal’ 10%...That is said to be the biggest fall in any five-year period since the 1920s.”

What's more, the official figures for wage growth exclude those classed as self-employed - some four million people, who have seen large falls in their real income since the onset of the crisis and in the period before. Some estimates suggest that the incomes of the self-employed have fallen by almost one-third in the past 12 years.

Once again, we see that for all the talk about improving wages, the official figures gloss over a reality of declining living standards and rising inequality, where a tiny elite get richer whilst the rest struggle just to keep their head above the water.

Unemployment: the numbers and the reality

Meanwhile, other recent headlines have pointed to the falling rate of unemployment, which now stands at 6.9% (officially) - a five-year low of 2.24 million. But again, the official statistics say nothing about the reality facing those who are working or looking for work.

The fact is that the relatively low unemployment in Britain - compared to other crisis-ridden countries - is simply the other side of the coin to the short-term and parasitic nature of the British capitalism. Rather than investing in real production - i.e. in technology and machinery to increase productivity and improve living standards - the capitalists in Britain have instead taken advantage of conditions in Britain to keep people in work in low-paid, precarious jobs.

The rise in zero-hour contracts is a sign of this increasingly precarious nature of employment. Another indication is the phenomena of the surge in the number of people now classed as self-employed, with one-in-seven of the workforce now officially in self-employment, an increase of 15% - almost 600,000 in absolute terms - since the beginning of the recession.

Thousands, having lost their secure jobs, are now forced to scrape a living off insecure odd-jobs in self-employment. Thousands more have been taken off permanent, stable employment contracts by their employers and instead forced to do the same work as previously, but now as self-employed sub-contracted workers, thus saving companies the cost of National Insurance and other employment costs (and saving the government on unemployment benefits).

The TUC estimates that nearly half of all jobs “created” since 2010 are those moving into self-employment, with 40% of these being only part-time. As TUC General Secretary Frances O’Grady commented:

"There may be perfectly good reasons for being self-employed, but it would be naive to think that all these workers are really budding entrepreneurs. “These figures instead suggest that many employee roles are being replaced by self-employed positions. Bogus self-employment is bad news for staff as they miss out on vital rights at work, such as paid holidays and employer pension contributions, without having the advantage of being their own boss. "Self-employment is normally a very small part of the workforce, so the fact it's been outstripping employee job growth shows that the UK labour market is far weaker than headlines suggest."

In short, the officially falling unemployment figures mask the reality of increasing precariousness and exploitation for workers. Unemployment may officially be falling, but this says nothing about the amount of people who are “underemployed” - that is, in part-time, self-employed, or temporary jobs. No amount of fiddling the figures can convince ordinary working people that their lives are improving when their own experiences tell them otherwise.

So, whatever the Tories may say, the daily struggle to make ends meet in the face of life’s essentials growing ever more expensive means workers know what’s really going on. The growing disconnect between the lies and myths of bourgeois and the reality of life for the working class must eventually lead to an explosion of class struggle.

Things can only get better?

The unfortunate truth is that things are only going to get worse for the working class under capitalism, not better. 60% of the scheduled cuts are still to come and the world economy is in a fragile state. The euro crisis may have temporarily abated but the fundamental problems have not been solved. Meanwhile the slowdown in China and as well explosive events such as the deepening crisis in the Ukraine could serve to plunge the UK economy back into recession at any moment.

The fundamental problems of rising food, housing and energy prices cannot be solved under capitalism. A massive programme to build new homes is necessary to abate the housing crisis. Nationalisation of the means of producing and distributing food and energy combined with a plan of production to meet our growing needs is the only way to make these essentials once again affordable and available for all. These measures are not possible on the basis of system where goods are only produced for profit.

The Labour leadership correctly talks of a ‘Cost of living crisis’, yet while they identify the problem that faces working people they are unable to offer any real solutions. This is because they remain committed to managing a capitalist system which has no room for reforms. If they truly wish to raise living standards to acceptable levels and beyond then they must commit to a fundamental transformation of society along socialist lines.