Archive for January 2012

Squeezed middle: all pain, no gain

Matthew Whittaker

This article originally appeared in Public Finance Magazine

Average incomes in the ‘squeezed middle’ group will take until at least 2020 to return to their 2007 level – a trend made even worse by public sector cuts

With two out of three British workers facing pay freezes, inflation running at an annual average of 5.2% and widespread cuts to government spending on services and benefits, it is no wonder that the Oxford English Dictionary declared ‘squeezed middle’ to be its Word of the Year in 2011.

Waving goodbye to two decades

Gavin Kelly

This post originally appeared on Gavin's New Statesman blog

Another week, another terrible set of GDP figures, an IMF downgrade of the UK's growth prospects, and a new report showing the squeeze on living standards is set to run and run. The public, along with our politicians, is probably starting to grow immune to some of the shocking headlines about how long it will be before their incomes recover. All attempts at peering into our economic future do, of course, need to be taken with a handful of salt. And if long range economic forecasting is a mug's game, then seeking false precision about the resulting political consequences is truly the pursuit of fools.

Yet for all the uncertainty we can discern the broad contours of different possible paths for living standards over the rest of the decade. None are attractive -- though some are uglier than others. All are likely to challenge the standard assumptions upon which recent politics have been based.

Homeownership: the preserve of the rich?

Joe Coward

This post originally appeared on Mortgage Solutions

One of the most striking findings of our Squeezed Britain report, which sets out the economic position of the squeezed middle in forensic detail, is that home ownership is now out of reach for many people on low to middle incomes (LMI).

On the basis of current incomes, house prices and the loan-to-value ratios now available, it would take a first-time buyer on a low to middle income 22 years to save for a deposit compared to three to five years in the 1980s and 1990s.

The real squeezed middle could stagnate for 20 years

Joe Coward

This post originally appeared on Left Foot Forward

This morning Liam Byrne and David Laws launched a new Resolution Foundation report, Squeezed Britain, which sets out the economic position of the squeezed middle in forensic detail, offering some pointers towards what will be the key political issues over the next few years.

The report focuses on people on low to middle incomes, who the Resolution Foundation define as working-age households who are living largely independent of the state but with incomes below the median (middle).

This group of 10.1 million adults and 5.8 million households comprises approximately one third of the working age population, living on an average household income of £20,500 after tax.

Food and fuel prices will be key to inflation in the year ahead

James Plunkett

This post originally appeared on Left Foot Forward

Today’s ONS inflation statistics presage what will be one of the few positive economic stories this year

Backed by strong discounting from retailers, RPI fell from 5.2 per cent in November to 4.8 per cent in December, while CPI fell from 4.8 per cent to 4.2 per cent, its largest one month drop since December 2008.

Stressed-out-by-inflationThat of course means inflation remains at more than twice the level of its Bank of England target. Nonetheless, future months are likely to see further falls, bringing welcome relief to real household disposable income.

Labour needs an argument about the state not just the deficit

Gavin Kelly

This post originally appeared on Gavin's New Statesman blog

Following last week's media storm about the season's new East-end duo, Abbott and Glasman, the real business of politics will get back underway this week. And if the weekend's reports are anything to go by it will see Labour moving to a more muscular position, or at least tone, on deficit reduction.

The new year strategy is set to play down the importance of spending levels to the next phase of centre left politics as it talks up other routes to social justice. "We can't spend our way to the new economy", as Ed Miliband likes to say. The intellectual effort required by Labour to carve out what it sees as a progressive austerity agenda will be every bit as demanding as that required in the 1990s to reclaim fiscal prudence.