Archive for January 2011

The King's Speech: Governor's "bigger picture" isn't big enough, as published on Left Foot Forward

James Plunkett

Bank of England Governor Mervyn King yesterday acknowledged that Britain’s households are now facing the toughest squeeze on living standards since the 1920s. His comments echo the findings of our report Squeezed Britain, which revealed in December that, on the basis of Office for Budget Responsibility (OBR) projections, the average low-to-middle income family will be £720 poorer in 2012 than they were in 2009.

That all comes before the government’s planned spending cuts. And with King now admitting that inflation could hit 5 per cent this year, that £700 is likely to rise, with faster price-growth doing even more to corrode the value of wages...

Australia's squeezed middle on a sticky wicket

Sue Regan

Sue Regan

Australians continue to lick their wounds over their Ashes’ loss. But looking beyond this recent sporting catastrophe, Australia is fairing well. The economy is strong, unemployment is around 5 % and the post GFC (Global Financial Crisis) is relatively tiny. Whilst economic prospects are currently far better than in the UK, Australia still provides a useful comparator. In political terms, the battle for the ‘squeezed middle’, however it is defined, is going on in earnest in this particular corner of the globe and has been for decades.

Whilst the term ‘squeezed middle’ is not used, there is persistent political interest in wooing working people who fight hard to get by. John Howard became prime minister in 1996 by winning over many traditional Labour voters, who became known as ‘Howard’s battlers’. It was the battlers’ realisation that whoever managed the economy best would help them the most, which shook left wing politics to the core of its union bedrock. In 2007, Kevin Rudd took back power for Labour vowing to ease the pressures on ‘working families’ and by promising to show more fiscal restraint than the incumbent Tories. The battlers have proved themselves to be true swinging voters, throwing their allegiance behind whoever they think can look after their ‘hip-pocket’ the best. As a consequence, the plight of low-to-middle earners has often been central to Australian political discourse...

James Plunkett and Gavin kelly

This week, Nick Clegg added his name to the fast-growing list of politicians addressing the critical question of living standards. His phrase of choice was ‘alarm clock Britain’, in effect his version of Ed Miliband’s ‘squeezed middle’. It is, of course, a clunking label for what is a serious topic (hardly the first time a politician has achieved such a feat). But quibbles over terminology aside – and as Miliband’s article on Friday confirmed – these are the first serious shots in the political battle to frame the coalition’s crucial March Budget. This week, Nick Clegg added his name to the fast-growing list of politicians addressing the critical question of living standards. His phrase of choice was ‘alarm clock Britain’, in effect his version of Ed Miliband’s ‘squeezed middle’. It is, of course, a clunking label for what is a serious topic (hardly the first time a politician has achieved such a feat). But quibbles over terminology aside – and as Miliband’s article on Friday confirmed – these are the first serious shots in the political battle to frame the coalition’s crucial March Budget.

The Spirit Level: is income equality the sole solution?

Vidhya Alakeson

Earlier this week, the ippr hosted a seminar with Richard Wilkinson, author of The Spirit Level. Wilkinson presented data set after data set to make one basic point: more equal societies have better social outcomes such as rates of mental illness and teenage pregnancy, not just for those at the bottom but for everyone. A wealthy, well-educated person in Sweden will be healthier and his children will do better at school than a similarly wealthy person in the UK. This is because Sweden is a more equal society than the UK, by which Wilkinson means that the ratio of the incomes of the top 20 percent in society compared to the bottom 20 percent is smaller.

Wilkinson’s theory about why unequal societies have poorer social outcomes stems from evolutionary psychology. He argues that in an unequal society, concerns about status dominate. Those at the bottom of the income distribution have low status which leads to persistent stress which in turn leads to poor social outcomes due to the negative impacts of elevated levels of cortisol, the stress hormone. The impact of cortisol on health, in particular, has been well documented by the World Health Organisation and others as part of the explanation for persistent health inequalities...

Happy New Year?

Katherine Green

Well, after lots of talk of fiscal consolidation, the first real day of reckoning has arrived: today VAT rose to 20% - the first increase in the main rate of VAT since 1991, moving the UK from below average to nearer the top of international comparisons. Fiscal consolidation may be necessary – to some degree at least - but the big worry about VAT is that it’s regressive...