Why most people are getting poorer

cashMost 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

How long can this go on? Not the Coalition, but peace on the streets?

The latest news about inflation – RPI up last month from 2.8% to 3.2% when wages are virtually flat – is bad enough, but the background makes this a whole lot worse. Since 9 August 2007 when the collapse at Northern Rock heralded the start of the Great Financial Crash, debt, despite all the privations of the last 5 years, has not eased, it has deteriorated further.

Total debt – not just government debt which gets all the attention, but the equally important household, financial and corporate debt – has actually increased in 10 Western countries since 2007. One of those is the UK, but the list also includes the US, Germany, France, Canada as well as the more predictable countries in deep trouble – Greece, Spain, Portugal, Italy, and Ireland. Continue reading

Falling real wages, and still the bastards whinge about inflation

Mervyn King recently pointed out that real UK wages in 2011 “are likely to be no higher than they were in 2005… One has to go back to the 1920s to find a time when real wages fell over a period of six years.” This, of course underestimates the drastic fall in living standards, since rising unemployment makes them fall faster still, and the fall has really happened in the last two years.

No-one seriously pretends that rising inflation is the result of wage pressure. It’s the result of rising world energy prices (increasing the cost of living by 4-5%), food and other rising prices on the world market (another 6% excluding the effect of the devaluation of sterling) and the VAT rise (which adds another 1½%). We shouldn’t have imposed the VAT rise but the rest was unavoidable. Continue reading

Put growth and jobs first

Ed Balls lost no time in attacking the government when the latest figures emerged showing a contraction of the economy in the last quarter, urging them to “urgently re-think their reckless plan to cut the deficit too far and too fast and start putting growth and jobs first.” Osborne’s reaction, however, is “we’re not going to be blown off course by the bad weather.” In fact, it’s worse than that: at the very time we might be slipping into a double-dip, the government’s primary focus is likely to be on inflation. The markets are already assuming that there will be a three points rise in interest rates this year in spite of city fears that higher rates too soon “could be GDP suicide“. Higher prices are primarily caused by a weak pound, the government’s foolish decision to raise VAT and the surge in global commodity prices. If this turns out not to be a temporary inflation spike, it is surely right to increase the inflation target rather than prejudice growth and jobs. Continue reading

Clever ways to clobber the poor

The hidden cuts are always the nastiest.   Although Osborne announced that for benefit upratings he was abandoning the normal inflation measure that has been used since 1974, namely the retail price index (RPI),  and replacing it by a consumer prices index (CPI), the full implications of this have only now become clear.   Though the child benefit and housing benefit cuts have had much more publicity, the switch from RPI to CPI will be much more devastating. Continue reading