Archive for March 2011

Tough news for living standards from the OBR

James Plunkett

Yesterday’s budget had been pre-billed as a boost to living standards, and in particular as targeting the ‘squeezed middle’. Of course, for most in the group this was always going to be small beer in comparison to the impacts from last year’s Spending Review and emergency budget. But overall, did yesterday bring good or bad news for low-to-middle earners?

Osborne has not solved the cost of living crisis

Gavin Kelly

This blog first appeared on the New Statesman.

Stand back from the detail of today's Budget and what we observe is Britain's political class trying – and failing – to respond to the crisis in living standards facing Britain.

They are doing this at the same time as they, of course, seek to outmanoeuvre their political opponents and build support among their friends. One manifestation of this will be the growing tussle over tax cuts, which will increasingly dominate party politics in the years ahead.

Osborne the reformer is an unfinished work

James Plunkett

This blog first appeared on the Spectator blog, Coffeehouse.

One interesting aspect of today’s Budget is the government’s change of tack on personal allowances. Back in June 2010, when the Chancellor committed to raise allowances from £6,475 to £7,475, he chose to cancel out the gains for higher rate taxpayers by lowering the level at which the 40p tax rate kicks in. The idea was to focus the gains of the policy on basic rate taxpayers, making things a little more efficient. The 40p threshold will therefore be lowered from April this year from £43,875 to £42,475 with the result that 700,000 people will become higher rate taxpayers.

There is no single inflation rate

Matthew Whittaker

This blog first appeared on the Guardian.

In December we had the wrong type of snow. Now it's the wrong type of inflation, with the chancellor blaming bad borrowing figures on the type of price rises now hitting the UK economy. For consumers that all raises a basic question: what does it mean to say there's more than one type of inflation, and is this type good or a bad for my household bills?

Spiralling inflation continues to squeeze some more than others

Matthew Whittaker

This blog first appeared on The Spectator Blog, Coffeehouse.

The February inflation figures spell more bad news for living standards in the UK. With average weekly earnings growth standing at just 2.2 per cent, millions of workers continue to get poorer in real terms.

However, differences in the make-up of typical "shopping baskets" mean that the spending implications of inflation vary by income group. Since 2007, inflation has been driven primarily by increases in food and fuel prices. Given that such staples account for a larger share of weekly expenditure among lower income households than among higher income ones, the impact is felt more acutely in the lower half of the income distribution.

Wake-up call on childcare

Vidhya Alakeson

This blog first appeared on Public Finance.

Speaking at the Liberal Democrat’s Spring Conference, Nick Clegg once again took up the cause of hard working families in Britain – his ‘alarm clock Britain’, the people who want to get up and get on.

But changes to the childcare tax credit announced in the Comprehensive Spending Review and due to come in this April will leave these very families worse off. This at time when families are already struggling to cope with the high costs of food and fuel and wage freezes.

It's not all bad news on social mobility

Gavin Kelly

This blog first appeared on the New Statesman.

We all know the usual story on social mobility. It’s been falling steadily for ages and continued to fall during the Labour years. Plenty of politicians, journalists and pundits will line up to tell anyone willing to listen that things have got worse.

It sounds like a compelling story – the problem is, it’s not clear it’s true. To understand why, we need to differentiate two types of social mobility. The most common, and the one that gets by far the most attention, concerns the extent to which your parents determine your life chances (termed inter-generational mobility by the wonks). On this measure it’s true that studies published during the 2000s showed a fall in social mobility – but those studies compared a cohort born in 1958 with one born in 1970.