In a budget speech spent firefighting against his opponents’ attacks, Osborne’s most eye-catching claim was that household incomes are now higher in 2015 than in 2010. However like everything else this slippery chancellor does, nothing should be taken at face value. And once again the spin he has put on the facts is wildly misleading. He chose as his measure ‘real household disposable income per capita’ which he said is expected to show at the end of 2015 a marginally higher level than in 2010. Apart from the fact that it is a forecast, not a fact, the real question is whether it is the right metric for measuring living standards in the first place. It is badly flawed because it includes items that people wouldn’t consider as income at all such as ‘imputed rents’ (i.e. the rent that homeowners might receive if they did not live in their own home!). It also includes, bizarrely, the incomes of charities, universities and trade unions! Continue reading
Tagged with Cost of living
Things Labour needs to do to beat UKIP #2: raise pay and cap the cost of living
Whilst Ed Balls stuck stubbornly to accepting that the economy was now growing rather than “flatlining“, with his disastrous conclusion that you couldn’t fund spending by borrowing in the up-swing, Ed Miliband was absolutely right last year to focus on the cost of living. “The first and last test of economic policy is whether living standards for ordinary families are rising,” he said. And they’re not. Instead we have payday lenders, low-skilled jobs and stagnating wages. Predatory capitalism. Ed Miliband recognised that “the average doesn’t tell you the whole story.”
In their book on the rise of UKIP Revolt on the Right, the new gurus of the topic, Robert Ford and Matthew Goodwin explain the rise during the Thatcher and Blair years of the “left behinders” – the crucial group of working class voters who fell behind the average, that once were loyal to Labour and are now moving in their droves to UKIP. Here Ford & Goodwin explain what happened at the hands of Blairite “reformers”: Continue reading
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Consumer inflation may be low, but asset inflation is high and real wages keep falling
The latest UK annual CPI inflation statistics, for August 2014, were published yesterday by the Office for National Statistics. They show annual inflation down to 1.2%. The last time the annual rate was below this was in September 2009, in the depth of the recession, when it fell to 1.1%. Assuming that the present lower CPI inflation trend is continued in coming months, as seems probable, we will be back to levels last seen in the late 1990s and up to 2004. The lowest levels this century were in May 2000 (0.5%) and June 2002 (0.6%).
But there is a very big difference between then and now. Today, wages are running at an annual increase rate of around 0.7%, still well below CPI inflation. In the period 2001 to 2008, when the ONS wages dataset begins, total wages were mainly rising annually at around 3-5% – and till the 2008 crisis, never fell below the inflation rate.
The chart below shows the picture clearly for the period 2001 to 2014. Till 2008, total pay (which includes bonuses etc.) was always above inflation in annual % terms, usually well above. Since then, it has almost constantly been below inflation. N.b. we have estimated that total wage increases remain at 0.7% (the last figure published by ONS, for July) for the months of August and September 2014. Continue reading
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Why most people are getting poorer
Most people in Britain are getting poorer. For obvious reasons, the government and supporters of austerity would prefer not to discuss this fact.
Yet in the strained language of the Labour right, there has also been a clamour for Ed Miliband to ‘change the narrative’ on the economy by no longer talking about the cost of living crisis. This is based on the completely false notion that that the economic recovery under way will inevitably produce higher living standards. This fails to understand the content and purpose of current economic policy. It is also based on a refusal to face facts. Continue reading
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Labour’s cost of living contract
In less than three weeks voters will go to the polls with the UK still in the midsts of a cost of living crisis for ordinary people up and down the country.
After plunging the UK into a double dip recession, recent growth figures have left David Cameron denying a cost of living crisis exists.
However, the Coalition Government have presided over the slowest recovery for 100 years, breaking their promise to balance the books by 2015 and are on course to borrow £190 billion more than planned, with nearly a million young people still unemployed. Continue reading
