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Trends in Governance
  A report for the British Council by Will Hutton

Illustrated by Andrzrej Krauze


Britain is a society in an uncertain quest for new codes and mores; old rules do not work but there is little consensus on what the new ones might be. A better educated, more prosperous and less deferential public has acquired the taste for individualism, but is anxious about the economic and social consequences. The astonishing rise in consumer spending, outstripping the growth of the overall economy for the last seven years. is one facet of this new individualistic trend; another is the decline in settled political loyalties; another is the multiplicity of fads, cults and the interest in self-exploration and self-fulfilment. But simultaneously there is a growing revolt against the resulting consequences on inequality, an insistence that the delivery of public services be improved and a mounting distrust of the overarching dominance of business and business values. Yet there is no clear coalition capable of affording a coherent response to the confusion. in part because the now deeply ingrained individualism makes appeals to collective action fall on deaf ears.

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The political implications are obvious. New labour's ascendancy perfectly reflects the muddle and lack of an articulate way forward, which its own political stance represents. The country distrusts the individualism of the Conservative Party but equally will not embrace social democratic solutions to its problems. Thus New labour finds itself wary of becoming overtly the party of tax increases, regulation and state initiative even while it knows that without more resources and a stronger culture of social solidarity no serious attempt can be made to relieve poverty and build up public services. It talks the language of public-service improvement while being ultra-cautious in willing the means, in part because it knows the public is unconvinced. Equally the Conservative Party makes little advance; it is not plausibly able to argue the case for more social cohesion because it so obviously remains wedded to individualism. In this stasis political exchange has transmuted into a querulous managerialism, with both principal parties claiming they can manage better than the other -but neither espousing a coherent, values-based vision of what a better Britain might look like that courts a majority view, because there is no majority view to champion.

The politicians' uncertainties reflect the lack of clear templates by any broad coalition of social groups of the outlines of a better and just society. Business. of course. wants less regulation and taxation even while its leaders know they need to give a better account of themselves if business is to be more legitimate; hence the growing embrace of corporate social responsibility and recognition that explosive rises in executive pay cannot be justified. Business might be pleased that its agenda is so little challenged by government but it knows that the wider society remains sceptical and distrustful. Whatever the incantations to the overwhelming importance of private-sector wealth generation by the political and business elites. society knows it needs more than this.

Trade unions, for their part, are in an equal bind. They want more labour market regulation and support for unionisation, while knowing that unionism needs a wholly different image and relationship with its members and employers if it is to reverse decades of decline. Nor do fundamental questions stop there. The public sector knows it needs to restructure itself and that it needs private partners to raise its game, but there are limits to the role of the private sector in public activity. How to draw the fine line between the desire for more efficiency and the need to sustain public-service values of accountability and universality remains anxiously debated and unresolved.

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The uncertainties and ambiguities go further. Traditional social conservatism, preached through the organs of the Conservative press, insists that the old nuclear family must be culturally and financially buttressed as a bulwark of civil society and the nurturing of children before the ominous forces of modernity and family breakdown. But at the same time a combination of social liberalism and Britain's long-standing tradition of tolerance require that all forms of family type be respected. and dispute the evidence that divorce and step- families -set to become close to half of all families by 2010 -irretrievably damage children. Perhaps the most acute ambiguity of all is the attitude towards ethnic minorities and multi- culturalism. The country cannot decide whether it should -or even wants to - assimilate ethnic minorities into a necessarily more complex idea of Britishness, or whether the right approach is to respect the identities and separateness of a multiplicity of identities while insisting on the primacy of Britain, western values and command of English. The ambiguity is made worse by our own uncertainty: what is the Britain to which ethnic minorities are meant to relate?

This fractiousness, ambiguity and uncertainty reveals itself clearly in the country's attitudes towards the European Union. Pro-Europeans are unpersuasive in their advocacy of closer European integration; the country is fearful of giving up more anchors in this rapidly changing landscape and there is little cultural conviction that Britain really is European in its values and attitudes -America and Anglo-Saxon culture still beckon. Equally Euro-sceptics are unpersuasive in their protection of all things British; there is too much palpably wrong and globalisation too powerful a force to make the argument successfully that Britain can continue as an individual nation state with its sovereign parliament and unique way of life. The way of life is in flux; the parliament is not sovereign; and nation states' power is giving way to international influences. It is this very uncertainty that gives the European debate its bitterness. Both sides are unable to deliver a knock-out blow to the other while passionately believing in the justice of their cause -and the argument overflows into what kind of society Britain aims to be. feeding all the insecurities and uncertainties mentioned above.

What makes the argument so central to British debate is that it goes straight to the heart of how the country is governed and the legitimacy of its political institutions. The difficulty for the euro-sceptics and their ringing affirmation of the enduring importance of British parliamentary sovereignty is that life is draining out of the parliamentary process. The whole edifice is being challenged. The capacity of the monarch to dignify parliament and so sanctify the prerogative powers that the monarchy lends it -what makes the British state so uniquely powerful- has been undermined by the Royal Family's evident human frailties. While the Queen herself retains immense respect and loyalty, and some is conferred on Prince Charles, the rest of the family -beset by divorces, financial scandals and evident cynicism about its own role -is increasingly mocked and derided. Rather than lend credibility and legitimacy to the state, the state now lends credibility and legitimacy to it.

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That legitimacy, however, is under siege. Parliament is no longer the cockpit of the nation; its control by the majority party has always meant it was the cipher of the executive, but even the residual challenges to government initiative that used to be made in parliament are now more effectively made in the all encompassing media which has become the new locus of public debate. As disabling is the widespread feeling that political activity has declining purpose; political debates are managerial rather than political and because politicians no longer believe in the effectiveness of state action but rather the primacy of business, the ambition of politics is diminished. Moreover globalisation means that much effective action requires international collaboration, especially within the EU -inevitably a rather muddy and unheroic process. All these themes together mean that the political process has become devalued and voter enthusiasm for participation -reflected in dramatically lower voter turnouts -has declined.

Defending these structures to the last as the acme of democracy as Euro-sceptics is thus not easy; but pro-Europeans have their work cut out to explain why Europe will make the situation any better. All parties to the debate accept there needs to be renewal and re- energisation of Britain's political institutions, but to date this has defeated the reformers. In part this is because reform has been driven by the need to protect the essential centralised nature of the system, the most dramatic example of which was the government's initial proposal to appoint four-fifths of the members of the House of Lords. And in part this is because the forces at work -described above -are beyond the capacity of the reformers to address.

The drivers of this social and cultural change are enormous. Britain's economic structure has been transformed by globalisation. One of the paradoxes of the last decade is that Britain, for long the sick economic man of Europe, has enjoyed a period of economic success unparalleled since the second world war -despite continuing low productivity and low investment. The answer is that the economy. despite these long-standing weaknesses, is one of the leading beneficiaries of globalisation. This is self-evidently true of London, which has emerged as one of the world's leading global cities -but spill-over effects are discernible in other leading British cities.

It is not just the financial services industry where globalisation has allowed the City of London to exploit its already powerful position. The same is true of the media, energy, telecommunications, airlines, education and even health. London's universities and hospitals are as much a beneficiary of globalisation as its arts industry and oil companies; even activities like auctioneering or writing software for computer games have taken off before the opportunities afforded by globalisation. Heathrow is the busiest international airport in the world; more international financial transactions are conducted in London than in any other financial capital. Britain's continuing ability to attract more inward investment proportionally than any other country is a tribute to globalisation's benign effect.

London's advantages, and particular industries within London, have been entrenched by 'winner take all' effects. One of the by-products of the information and communication revolution is the speed with which information -and reputation -is now spread. As a result virtuous circle effects that used to take decades to establish now operate within years; a firm with an unique selling point can achieve market dominance fast, as can an entire city or region. Firms in the globalising economy must have a London location because they need to be part of the self-reinforcing network that affords comparative advantage. Airlines need slots at Heathrow; investment banks need to be part of the City; software houses need to be part of the ICT network.

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These 'hot' networks in London and the south-east -and in other major British regional capitals -have become extraordinary incubators of prosperity. Salaries have been bid up to international rates, so that the ratio of chief executive pay to blue collar pay has nearly doubled over the last twenty years. Directors in British companies are better paid than their counterparts anywhere else in Europe, although less than the Americans. Professionals with marketable knowledge skills -ranging from lawyers to software writers -have also seen their pay explode. Employment has boomed in the cities and suburbs where the new network industries are clustered, especially near international airports or internationally recognised universities -Manchester airport is as much a new growth pole as Cambridge University.

These areas have also seen strong growth in the micro-service industries servicing the new class of knowledge and professional workers, especially in the dual-income households whose numbers have grown enormously with increased participation of women in the labour market. With both partners working long hours in the 'hot' network, these households have needed to buy in support sponsoring entire new industries servicing their needs -tutors for children, nannies, interior designers, sports trainers and the like -along with the more conventional support from eating out in the mushrooming number of restaurants or seeking gardeners and the like. The result has been extraordinary grovvth in employment and in the character of work. Workers at whatever level in these burgeoning new sectors are much more demanding that their individuality be respected; they want work-life balance and more autonomy over how they organise their day-to-day working life. A growing number are prepared to declare independence from the organisation in which they work, developing a portfolio of jobs as so-called 'free-workers' -exploiting their reputation and access to the network of which they are part to work independently. Their work and career are an individual adventure.

The social impact of these developments is huge. One obvious result, with dual-income households able to support very large mortgages. is an equally extraordinary grovvth in house prices. Property prices, not only in London but also in 'hot' regional cities, are now comfortably the highest in Europe. And it is this prosperity that is the background to the new individualism, a curious fusion of sixties liberalism, Thatcherite precepts about the supremacy of choice as a virtue and the direct consequence of high per capita incomes and the extension of education. Individualism is the creed that justifies the new inequalities and in part creates them - even as its adherents yearn for the old solidarities that they know underpin a notion of the good society.

In education, for example, the new rich can not only afford to pay high fees for their children's education -they justify their opting out of the public system by insisting that its standards are too low or rough and ready to cater for their children's individual needs. Thus the rationale for private education, which used to be an appeal to snobbery and an entry ticket to the upper social classes, has subtly changed. Now it is the proper right of any parent to exercise their individual choice to see that their child has his or her individual educational needs met. As a result the private schools themselves have changed responding to the new demands that they educate well to justify their status; they have become educationally excellent and the examinations for entry are at least as tough as the old eleven-plus. A new elite is emerging combining meritocratic possession of intellectual skills and examination success, a wealthy social background and membership of exclusive private networks. In 2001 ninety-eight of the top 100 schools by A-level examination results were private.

Yet if individualism is propelling inequality and helping to justify it, there are countervailing forces. The sheer scope of the contemporary media -the multiplicity of television and radio channels alongside newspapers, magazines and the Internet all shouting to be heard and all critically holding society and its decision-makers to account- means that in this goldfish bowl little goes unobserved and unchallenged. For example, the recognition that educational achievement is critical to lifetime success has entered the public conversation via the media's critical gaze, as has the necessity that state schools raise their game. And so they have, under the pressure of a new national curriculum, school inspectors and more rigorous testing of pupils and schools themselves.

If in 1986 only twenty-five per cent of GCSE students achieved A* to C results, by 2001 the proportion had doubled to fifty per cent. Nor is this mere grade inflation as conservative critics allege; Britain's performance in international league tables of educational achievement has risen strongly. If the top 100 schools are almost entirely private, the proportion between public and private in the next 500 is more finely balanced. Oxford and Cambridge are under intense pressure to recruit more candidates from state schools after the publicity afforded Oxford University turning down the application of comprehensive-school educated Laura Spence.

The difficulty is that the state schools that are radically improving tend to be in Britain's 'hot'networks, so that inequality is taking on a new and uglier dimension. There is not just inequality of wealth and income, there is now a geographical inequality so that the chances of upward income and social mobility of low- and middle-income families is much greater if they live geographically within an area that is performing well economically and which will tend to have not just stronger public institutions, such as the better state schools, but also higher levels of social capital. Meanwhile those parts of Britain that have always suffered poverty and vicious cycles of depredation are even more locked into their status -and those who live in them have even poorer life chances.

These' cold' networks have 'loser lose all' effects. Besides the long-standing sources of disadvantage -low income, dependency, poor schools and insecure families -there is now overlaid another; exclusion from the 'hot' network and their job opportunities and culture. Sometimes the hot and cold networks can be physically very close, with social housing that cannot be given away only hundreds of yards from flats and houses whose values are growing exponentially; yet the gulf is yawning. To cross it the disadvantaged need to acquire not merely formal qualifications, but a range of soft skills in self-presentation and social exchange that may be beyond them. The new jobs in the micro-service economy, for example, such as bar-tending, tutoring children or fitness instruction, require that their holders behave as members of the 'hot' network in their attitudes, social skills and comportment. Individuals from the 'cold' network, brutalised by their background, are incapable of crossing the line - and are locked in low incomes or dependency upon the welfare system even though the numbers of unfilled vacancies have reached record levels.

To construct a political coalition that can bind society back together again before these immense trends is enormously problematic. The advantaged in the 'hot' networks are becoming increasingly wedded to their lifestyles and suspicious of the taxation and interventions that are necessary to address the social ills of the 'cold' networks; there is a retreat into self- reinforcing silos in which the better-off blame the worse-off for their condition. When this silo mentality is further entrenched by tribal loyalties to racial or ethnic differences the result is a tinder box -as witnessed by the riots in Oldham and Bradford over the summer of 2001. The subsequent Cantle report revealed a shocking degree of isolation between the Asian and white communities, in which some Asians revealed never meeting, working with or even talking to a white person. This is the most extreme example of a general trend to Balkanisation into social silos.

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Yet there remains a vigorous civic culture that is searching for a language and framework to organise a response. As argued earlier both orthodox conservative and social democratic answers find little popular echo, but there are the first signs of an emerging consensus around the precepts of a more hard-edged liberalism. This is the doctrine of enlightened individual self-interest, so that, for example, the case for prison reform is that, despite conservative insistence that prison works, recidivism rates are rising and current prison practice is failing. In the City a growing number of pension funds and insurance companies are becoming more activist, questioning whether racy financial packages for company directors actually serve their interests. There is a growing awareness, after decades of privatisation, that some values in the public sector -notably a desire to serve -are different from those in the private sector and must be cherished.

In short the British are beginning to address the social consequences of the economic success they have enjoyed, and to find new vehicles that can express the social contract to which they remain committed -even while powerful economic forces drive them apart. To the extent Britain is a beneficiary from globalisation, it is also a laboratory where the social and cultural consequences are most obvious -and where answers are beginning to be developed. Britain is actively wrestling with issues of: how a globalised country is best governed; how it relates to the regional grouping of which it is part; how it solves the social fragmentation that globalisation brings in its train; how it retains and develops high-quality public services; and how it treats ethnic minorities and the multiplicity of new family types and lifestyles.
It is impossible to judge whether the answers it supplies will work either for Britain or for other countries and cultures. But what can be said is that answers need to be found -and that at least in Britain the debate is being had.

Will Hutton 4 February 2002


Will Hutton, CEO, The Industrial Society

After starting his career at stockbrokers Phillips & Drew, Will Hutton pursued a media career, fulfilling roles as Producer/Director of The Money Programme, Economics Editor of Newsnight and reporter for Panorama. tn 1990 he joined Guardian Newspapers as Economics Editor and became Editor-in-Chief of The Observer in 1996. He has written five books, including the best-selling The State We're In and presented several topical television and radio series.

He Joined The Industrial Society in January 2000 as Chief Executive Officer.

updated by T. Anthony 14.04.02

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